12-01563-brl doc 22 filed 09/24/12 entered 09/24/12 20:09 ...€¦ · motion to dismiss for lack of...

Baker & Hostetler LLP 45 Rockefeller Plaza New York, NY 10111 Telephone: (212) 589-4200 Facsimile: (212) 589-4201

Attorneys for Irving H. Picard, Trustee for the Substantively Consolidated SIPA Liquidation of Bernard L. Madoff Investment Securities LLC and Estate of Bernard L. Madoff

UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK SECURITIES INVESTOR PROTECTION CORPORATION,

Plaintiff, Adv. Pro. No. 08-01789 (BRL) v. SIPA LIQUIDATION

BERNARD L. MADOFF INVESTMENT (Substantively Consolidated) SECURITIES LLC,

Defendant. In re: BERNARD L. MADOFF,

Debtor. IRVING H. PICARD, Trustee for the Liquidation of Bernard L. Madoff Investment Securities LLC,

Plaintiff, Adv. Pro. No. 12-01563 (BRL) v.

ACCESS MANAGEMENT LUXEMBOURG S.A. (f/k/a ACCESS INTERNATIONAL ADVISORS (LUXEMBOURG) S.A.), as represented by its Liquidator FERNAND ENTRINGER, PIERRE DELANDMETER, and PATRICK LITTAYE,

Defendants.

MEMORANDUM OF LAW IN FURTHER SUPPORT OF

TRUSTEE’S APPLICATION FOR ENFORCEMENT OF AUTOMATIC STAY AND INJUNCTION AND IN OPPOSITION TO MOTION TO DISMISS

12-01563-brl Doc 22 Filed 09/24/12 Entered 09/24/12 20:09:45 Main Document Pg 1 of 54

TABLE OF CONTENTS

Page

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PRELIMINARY STATEMENT ................................................................................................... 1

ARGUMENT ................................................................................................................................. 4

THE LUXALPHA THIRD PARTY WRIT IS VOID AB INITIO AND THE THIRD PARTY PLAINTIFFS SHOULD BE ENJOINED ............................................................ 4

I. PERSONAL JURISDICTION OVER THE THIRD PARTY PLAINTIFFS IS NOT REQUIRED FOR A DECLARATION THAT THE AUTOMATIC STAY, STAY ORDERS, SIPA, AND THE BARTON DOCTRINE HAVE BEEN VIOLATED............................................................... 4

II. STANDARD OF REVIEW ................................................................................... 5

A. The Facts Must Be Construed in the Light Most Favorable to the Trustee........................................................................................................ 5

B. The Prima Facie Standard Applies to the Third Party Plaintiffs’ Motion to Dismiss for Lack of Personal Jurisdiction ................................ 6

III. THE THIRD PARTY PLAINTIFFS’ PURPOSEFUL INTERFERENCE WITH THE ADMINISTRATION OF THE BLMIS ESTATE SUBJECTS THEM TO THE JURISDICTION OF THIS COURT .......................................... 8

A. The Law Is Clear That an Action Affecting the Administration of the Bankruptcy Estate Subjects a Foreign Defendant to Jurisdiction ........ 8

B. The Luxalpha Third Party Writ Purposely Affects the Administration of the BLMIS Estate ......................................................... 9

IV. LITTAYE’S AND DELANDMETER’S NUMEROUS CONTACTS WITH THE UNITED STATES ARE FULLY SUPPORTED BY DOCUMENTARY EVIDENCE AND DIRECTLY RELATE TO THE TRUSTEE’S CLAIMS ........................................................................................ 11

A. Littaye’s Substantial Contacts With the United States ............................ 11

B. Delandmeter’s Substantial Contacts With the United States ................... 16

C. The Trustee’s Claims Arise out of Littaye’s and Delandmeter’s Contacts With the United States .............................................................. 19

V. THE COURT HAS PERSONAL JURISDICTION OVER AML ....................... 21

A. AML Served Various Management and Advisory Roles for Luxalpha, Directing Investment Activity to the United States and Giving Rise to Personal Jurisdiction ........................................................ 21

1. AML and Its Predecessor Serviced Luxalpha as Early as 2004.............................................................................................. 21


TABLE OF CONTENTS (continued)

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2. AML Became Luxalpha’s Manager in 2008 After UBS Raised Concerns About the Fund and Closed the Fund to New Subscriptions ....................................................................... 23

3. AML’s Roles and Functions With Respect to Luxalpha and BLMIS Give Rise to Specific Jurisdiction ................................... 24

4. AML Is Also Subject to Jurisdiction Because Access’s New York Office Acted as Its Agent in New York ..................... 26

a. AML Was Little More Than a Shell Corporation Operating at the Direction of Access’s New York Office, With the Purpose of Facilitating Investments into BLMIS ...................................................................... 26

b. The Jurisdictional Contacts of Access’s New York Office Should Be Imputed to AML Because of Their Agency Relationship .............................................. 29

B. AML Was a Mere Department of Access’s New York Office, Subjecting It to the Court’s General Jurisdiction ..................................... 32

VI. A SECTION 105 INJUNCTION IS WARRANTED AND CONSISTENT WITH APPLICABLE PRINCIPLES OF INTERNATIONAL COMITY .......... 37

A. The China Trade Test Does Not Apply to the Bankruptcy Court’s Power to Issue the Requested Injunction Under Section 105 .................. 38

B. Even if the China Trade Test Were to Apply, the Requested Injunction Would Be Warranted .............................................................. 42

1. Enjoining the Luxalpha Third Party Writ Is Consistent With the China Trade Threshold Factors .................................... 43

2. The Third Party Plaintiffs Have Not Established That the Additional Factors Weigh Against Enforcement of the Automatic Stay or an Injunction .................................................. 44

CONCLUSION ............................................................................................................................ 45


TABLE OF AUTHORITIES Page(s)

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CASES

Access Telecom, Inc. v. MCI Telecomms. Corp., 197 F.3d 694 (5th Cir. 1999) ...................................................................................................26

APWU v. Potter, 343 F.3d 619 (2d Cir. 2003)...................................................................................................5, 6

Ball v. Metallurgie Hoboken-Overpelt, S.A., 902 F.2d 194 (2d Cir. 1990).......................................................................................................6

Bialek v. Racal-Milgo, Inc., 545 F. Supp. 25 (S.D.N.Y. 1982).............................................................................................30

Bruce Lee Enters., LLC v. A.V.E.L.A., Inc., No. 10 CIV 2333, 2011 WL 1327137 (S.D.N.Y. Mar. 30, 2011) .............................................6

Burger King Corp. v. Rudzewicz, 471 U.S. 642 (1985) .................................................................................................................13

Calder v. Jones, 465 U.S. 783 (1984) ...................................................................................................................8

Chew v. Dietrich, 143 F.3d 24 (2d Cir. 1998).......................................................................................................20

In re Chiles Power Supply Co., 264 B.R. 533 (Bankr. W.D. Mo. 2001)..................................................................................8, 9

China Trade & Dev. Corp. v. M.V. Choong Yong, 837 F.2d 33 (2d Cir. 1987)............................................................................................... passim

Compagnie des Bauxites de Guinea v. Ins. Co. of N. Am., 651 F.2d 877 (3d Cir. 1981).....................................................................................................41

Cooper, Robertson & Partners, LLP v. Vail, 143 F. Supp. 2d 367 (S.D.N.Y. 2001) ......................................................................................14

Cromer Fin. Ltd. v. Berger, 137 F. Supp. 2d 452 (S.D.N.Y. 2001) ................................................................................24, 25

Current Textiles Corp. v. Ava Industries, Inc., 624 F. Supp. 819 (S.D.N.Y. 1985)...........................................................................................15

Del Ponte v. Universal City Dev. Partners, Ltd., No. 07-CV-2360, 2008 WL 169358 (S.D.N.Y. Jan. 16, 2008) ...............................................20


TABLE OF AUTHORITIES (continued)

Page(s)

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Derthick v. Bassett-Walker Inc., No. 90 Civ. 5427, 1992 WL 249951 (S.D.N.Y. Sept. 23, 1992) .......................................36, 37

Dorfman v. Marriott Int’l Hotels, Inc., No. 99 CIV 10496, 2002 WL 14363 (S.D.N.Y. Jan. 3, 2002) ...........................................30, 37

Erick Van Egeraat Associated Architects B.V. v. NBBJ LLC, No. 08 Civ. 7873, 2009 WL 1209020 (S.D.N.Y. Apr. 29, 2009) ......................................32, 37

ESI, Inc. v. Coastal Corp., 61 F. Supp. 2d 35 (S.D.N.Y. 1999) ..........................................................................................34

Fotochrome, Inc. v. Copal Co., 517 F.2d 512 (2d Cir. 1975).......................................................................................................5

Gau Shan Co. v. Bankers Trust Co., 956 F.2d 1349 (6th Cir. 1992) .................................................................................................41

Gen. Elec. Co. v. Deutz AG, 270 F.3d 144 (3d Cir. 2001).....................................................................................................41

Ginsburg v. Gov’t Prop. Trust, No. 07 Civ. 365 (CSH) (ECF), 2007 WL 2981683 (S.D.N.Y. Oct. 10, 2007) ........................30

Goss Int’l Corp. v. Man Roland Druckmaschinen Aktiengesellschaft, 491 F.3d 355 (8th Cir. 2007) ...................................................................................................41

Hamilton v. Atlas Turner, Inc., 197 F.3d 58 (2d Cir. 1999).........................................................................................................6

In re Hilsen, No. 87-11261 (JMP), 2008 WL 2945996 (Bankr. S.D.N.Y. July 25, 2008) .........................6, 7

Hobson v. Travelstead (In re Travelstead), 227 B.R. 638 (D. Md. 1998) ......................................................................................................4

Hoffritz for Cutlery, Inc. v. Amajac, Ltd., 763 F.2d 55 (2d Cir. 1985)...............................................................................................5, 8, 17

Hyundai Mipo Dockyard Co. v. AEP/Borden Indus. (In re Rationis Enters., Inc. of Panama), 261 F.3d 264 (2d Cir. 2001).....................................................................................................40

Ibeto Petrochemical Indus. Ltd. v. M/T Beffen, 475 F.3d 56 (2d Cir. 2007).......................................................................................................41



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Jamaica Shipping Co. v. Orient Shipping Rotterdam, B.V. (In re Millenium Seacarriers, Inc.), 458 F.3d 92 (2d Cir. 2006).......................................................................................................39

Jayne v. Royal Jordanian Airlines Corp., 502 F. Supp. 848 (S.D.N.Y. 1980).....................................................................................34, 35

Kahn Lucas Lancaster, Inc. v. Lark Int’l Ltd., 956 F. Supp. 1131 (S.D.N.Y. 1997) ...................................................................................14, 15

Karaha Bodas Co. v. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara, 500 F.3d 111 (2d Cir. 2007)...............................................................................................39, 40

Kash ‘n Gold, Ltd. v. ATSPI, Inc., 690 F. Supp. 1160 (E.D.N.Y. 1988) ........................................................................................15

Koehler v. Bank of Bermuda Ltd., 101 F.3d 863 (2d Cir. 1996).....................................................................................................34

Laker Airways, Ltd. v. Sabena, Belgian World Airlines, 731 F.2d 909 (D.C. Cir. 1984) .................................................................................................41

Lam Yeen Leng v. Pinnacle Performance Ltd., 474 F. App’x 810 (2d Cir. 2012) .............................................................................................43

LaMonica v. N. of Eng. Protecting & Indem. Ass’n Ltd. (In re Probulk Inc.), 407 B.R. 56 (Bankr. S.D.N.Y. 2009) .........................................................................................8

Lipshie v. AM Cable TV Indus., Inc. (In re Geauga Trenching Corp.), 110 B.R. 638 (Bankr. E.D.N.Y. 1990) .......................................................................................7

Lykes Bros. Steamship Co. v. Hanseatic Marine Service, GmbH (In re Lykes Bros. Steamship Co.), 207 B.R. 282 (Bankr. M.D. Fla. 1997) ................................................................................8, 10

Lyondell Chem. Co. v. CenterPoint Energy Gas Servs., Inc. (In re Lyondell Chem. Co.), 402 B.R. 571 (Bankr. S.D.N.Y. 2009) .....................................................................................40

Maxwell Commc’n Corp. v. Societe Generale (In re Maxwell Commc’n Corp.), 93 F.3d 1036 (2d Cir. 1996).....................................................................................................41

Mitchell v. Washingtonville Cent. Sch. Dist., 190 F.3d 1 (2d Cir. 1999) ..........................................................................................................6

Nelly de Vuyst, USA, Inc. v. Europe Cosmetiques, Inc., No. 11 CV 1491(VB), 2012 WL 246673 (S.D.N.Y. Jan. 6, 2012) ............................................6



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Newbro v. Freed, 337 F. Supp. 2d 428 (S.D.N.Y. 2004) ......................................................................................25

Obabueki v. Int’l Bus. Mach. Corp., No. 99 Civ. 11262, 2001 WL 921172 (S.D.N.Y. Aug. 14, 2001) ...........................................36

Official Comm. of Unsecured Creditors v. Transpacific Corp. (In re Commodore Int’l, Ltd.), 242 B.R. 243 (Bankr. S.D.N.Y. 1999) .......................................................................................7

Palmieri v. Estefan, 793 F. Supp. 1182 (S.D.N.Y. 1992) .........................................................................................32

Paramedics Electromedicina Comercial, Ltda. V. GE Med. Sys. Info. Techs., Inc., 369 F.3d 645 (2d Cir. 2004).....................................................................................................43

Penguin Grp. (USA) Inc. v. Am. Buddha, 609 F.3d 30 (2d Cir. 2010).........................................................................................................7

Picard v. Chais (In re Bernard L. Madoff Inv. Sec. LLC), 440 B.R. 274 (Bankr. S.D.N.Y. 2010) ...................................................................20, 21, 24, 25

Picard v. Cohmad Sec. Corp. (In re Bernard L. Madoff Inv. Sec. LLC), 418 B.R. 75 (Bankr. S.D.N.Y. 2009) ...................................................................................7, 24

Picard v. Magnify Inc. (In re Bernard L. Madoff Inv. Sec. LLC), No. 10-05279 (BRL), 2012 WL 2254995 (Bankr. S.D.N.Y. June 15, 2012) ........................... 6

Picard v. Maxam Absolute Return Fund, L.P. (In re Bernard L. Madoff Inv. Sec. LLC), 474 B.R. 76 (S.D.N.Y. 2012) ........................................................................................... passim

Picard v. Maxam Absolute Return Fund, L.P. (In re Bernard L. Madoff Inv. Sec. LLC), 460 B.R. 106 (Bankr. S.D.N.Y. 2011) ............................................................................. passim

Porina v. Marwood Shipping Co., 521 F.3d 122 (2d Cir. 2008).....................................................................................................20

RAR, Inc. v. Turner Diesel, Ltd., 107 F.3d 1272 (7th Cir. 1997) .................................................................................................26

Remington Rand Corp.-Delaware v. Bus. Sys., Inc., 830 F.2d 1260 (3d Cir. 1987)...................................................................................................41

Savage & Assocs., P.C. v. Banda 26, S.A. (In re Teligent, Inc.), No. 01-12974 (SMB), 2004 WL 724945 (Bankr. S.D.N.Y. 2004) ............................................7



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Sayles v. Pacific Eng’g & Constructors, Ltd., No. 08 CV 676S, 2012 WL 895944 (W.D.N.Y. Mar. 15, 2012) .............................................35

Schenker v. Assicurazioni Genereali S.p.A., No. 98 Civ. 9186(MBM), 2002 WL 1560788 (S.D.N.Y. July 15, 2002) ............................5, 28

Sinatra v. Gucci (In re Gucci), 309 B.R. 679 (S.D.N.Y. 2004) ...................................................................................................5

Somportex Ltd. v. Phila. Chewing Gum Corp., 453 F.2d 435 (3d Cir. 1972).....................................................................................................38

SongByrd, Inc. v. Estate of Grossman, 206 F.3d 172 (2d Cir. 2000).....................................................................................................20

Stonington Partners, Inc. v. Lernout & Hauspie Speech Prods. N.V., 310 F.3d 118 (3d Cir. 2002)...............................................................................................40, 41

Storm LLC v. Telenor Mobile Commc’ns AS, No. 06 Civ. 13157(GEL), 2006 WL 3735657 (S.D.N.Y. Dec. 15, 2006) .........................35, 43

Tamam v. Fransabank Sal, 677 F. Supp. 2d 720 (S.D.N.Y. 2010) ......................................................................................26

In re Tamoxifen Citrate Antitrust Litig., 262 F. Supp. 2d 17 (E.D.N.Y. 2003) .....................................................................................7, 8

Tese-Milner v. De Beers Centenary A.G., 613 F. Supp. 2d 404 (S.D.N.Y. 2009) ......................................................................................31

Thomas v. Ashcroft, 470 F.3d 491 (2d Cir. 2006).......................................................................................................7

Transmarittima Sarda Italnavi Flotte Ruiniti S.p.A. v. Foremost Ins. Co., 482 F. Supp. 110 (S.D.N.Y. 1979).............................................................................................5

Tsegaye v. Impol Aluminum Corp., No. 01 Civ. 5943, 2003 WL 221743 (S.D.N.Y. Jan. 30, 2003) ...............................................34

U.S. Lines, Inc. v. GAC Marine Fuels Ltd. (In re McLean Indus. Inc.), 68 B.R. 690 (Bankr. S.D.N.Y. 1986) ...................................................................................9, 19

Underwood v. Hilliard (In re Rimsat, Ltd.), 98 F.3d 956 (7th Cir. 1996) .....................................................................................................10



Page(s)

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In re Vivendi Universal, S.A. Sec. Litig., No. 02 Civ. 5571, 2009 WL 3859066 (S.D.N.Y. Nov. 19, 2009) ...........................................43

Volkswagenwerk Aktiengesellschaft v. Beech Aircraft Corp., 751 F.2d 117 (2d Cir. 1984)...............................................................................................34, 35

Williams v. Law Soc’y of Hong Kong (In re Williams), 264 B.R. 234 (Bankr. D. Conn. 2001) .....................................................................................19

Wiwa v. Royal Dutch Petroleum Co., 226 F.3d 88 (2d Cir. 2000).................................................................................................30, 31

STATUTES

11 U.S.C. §§ 101 et seq. ..................................................................................................................1

11 U.S.C. § 105 ............................................................................................................37, 38, 40, 42

11 U.S.C. § 105(a) ...........................................................................................................................1

11 U.S.C. § 362(a) .......................................................................................................................1, 8

11 U.S.C. § 541(a) ...........................................................................................................................4

15 U.S.C. §§ 78aaa et seq. ..............................................................................................................1

RULES

Fed. R. Bankr. P. 2004 ...........................................................................................................6, 7, 29

Fed. R. Civ. P. 12(b)(2)................................................................................................................6, 7


Irving H. Picard, as trustee (the “Trustee”) for the substantively consolidated liquidation

of the business of Bernard L. Madoff Investment Securities LLC (“BLMIS”) under the Securities

Investor Protection Act, 15 U.S.C. §§ 78aaa et seq. (“SIPA”) and the estate of Bernard L. Madoff

(“Madoff”), individually (collectively, the “Debtor”), by and through his undersigned counsel,

respectfully submits this reply memorandum of law in further support of his application (the

“Trustee’s Application”), pursuant to §§ 362(a) and 105(a) of title 11 of the United States Code,

11 U.S.C. §§ 101 et seq. (the “Bankruptcy Code”) to: (i) enforce the automatic stay and stay

orders issued by the United States District Court for the Southern District of New York issued on

December 15, 2008, December 18, 2008 and February 9, 2009 (the “Stay Orders”); (ii) declare

that an action filed directly against the Trustee in the District Court of Luxembourg (the

“Luxalpha Third Party Writ”) violates the automatic stay, the Stay Orders, SIPA, and the Barton

doctrine and is void ab initio under United States law; and (iii) otherwise enjoin Access

Management Luxembourg S.A. (f/k/a Access International Advisors (Luxembourg) S.A.)

(“AML”) as represented by its liquidator, Fernand Entringer, and Pierre Delandmeter

(“Delandmeter”) and Patrick Littaye (“Littaye”) (collectively, the “Third Party Plaintiffs”) from

pursuing the Luxalpha Third Party Writ, as against the Trustee. The Trustee further submits this

memorandum of law in opposition to the Third Party Plaintiffs’ motion to dismiss the Trustee’s

adversary proceeding (the “Motion”).

PRELIMINARY STATEMENT

The Third Party Plaintiffs concede that the Luxalpha Third Party Writ is in violation of

the automatic stay, the Stay Orders, SIPA and the Barton Doctrine. They contend only that: (i)

this Court lacks jurisdiction over them; (ii) the Luxalpha Third Party Writ does not seek estate

assets; and (iii) under the foreign anti-suit injunction test established in China Trade &


2

Development Corp. v. M.V. Choong Yong, 837 F.2d 33 (2d Cir. 1987), this Court may not enjoin

them from proceeding. They are wrong on all counts.

First, the Third Party Plaintiffs mistakenly contend that unless this Court has personal

jurisdiction over them, it cannot enforce the automatic stay, and thus, they argue, the Trustee’s

case boils down to a dispute over personal jurisdiction. As an initial matter, this Court need not

have jurisdiction over the Third Party Plaintiffs in order to declare that the Luxalpha Third Party

Writ, as against the Trustee, violates the automatic stay, the Stay Orders, SIPA, and the Barton

doctrine. As a matter of enforcement, personal jurisdiction may be required to enjoin the Third

Party Plaintiffs from proceeding with their foreign action. But the Trustee alternatively could

seek to enforce any declaration of this Court in the courts of Luxembourg. That said, the Third

Party Plaintiffs’ fingerprints are all over Madoff’s Ponzi Scheme. Littaye and Delandmeter

funneled vast sums of money into the scheme through AML and its affiliates, and had numerous

substantive contacts with New York in so doing, as shown in the Trustee’s voluminous

documentary evidence. Littaye’s and Delandmeter’s self-serving declarations should not trump

the Trustee’s specific allegations and documentary evidence. Should this Court require

additional evidence on jurisdiction, the Trustee respectfully requests limited jurisdictional

discovery, including, but not limited to, Littaye’s and Delandmeter’s depositions.

Second, there is one reason and one reason alone that the Third Party Plaintiffs are suing

the Trustee in Luxembourg—to shift any damages to the BLMIS estate for which the Third Party

Plaintiffs are found liable. Were they successful, the Trustee would argue strenuously that the

Third Party Plaintiffs could not recover from the BLMIS estate, just as he would if such a suit

were permitted to proceed in the United States. But the Third Party Plaintiffs’ likely inability to

recover from the BLMIS estate should not be taken to mean that the automatic stay does not


3

apply. Nor does it somehow override the Stay Orders, SIPA, or the Barton doctrine. The Third

Party Plaintiffs’ untenable position—that the applicability of the law is measured by a litigant’s

ability to win—reveals the absence of any legitimate opposition to the Trustee’s Application. As

much as the Third Party Plaintiffs attempt to explain away the Luxalpha Third Party Writ as a

procedural mechanism to determine liability, the Writ speaks for itself and says otherwise,

seeking damages of a billion dollars or more against the BLMIS estate.

Third, by urging application of the China Trade test, the Third Party Plaintiffs seek to

evade this Court’s jurisdiction by asking this Court to engage in “square peg, round hole”

jurisprudence. The China Trade test simply has no application in a bankruptcy proceeding

where foreign litigants are violating a court order. Rather, that test contemplates two competing

(and legally permissible) parallel actions in the United States and abroad. In any event, the

China Trade standard—though not applicable—would nevertheless be satisfied here even if it

did pertain.

There is no question that the Luxalpha Third Party Writ, if brought here, would be void

ab initio. The mere fact that the Luxalpha Third Party Writ was brought abroad should not form

the basis for allowing it to proceed. One can only imagine the onslaught of actions against the

Trustee seeking to recover BLMIS assets if such suits were permissible. They are not. The

Trustee’s Application should be granted and the Third Party Plaintiffs’ Motion should be denied.


4

ARGUMENT

THE LUXALPHA THIRD PARTY WRIT IS VOID AB INITIO AND THE THIRD PARTY PLAINTIFFS SHOULD BE ENJOINED

I. PERSONAL JURISDICTION OVER THE THIRD PARTY PLAINTIFFS IS NOT REQUIRED FOR A DECLARATION THAT THE AUTOMATIC STAY, STAY ORDERS, SIPA, AND THE BARTON DOCTRINE HAVE BEEN VIOLATED

The Third Party Plaintiffs assume that this Court is powerless to remedy their violation of

the automatic stay should the Court determine that it lacks personal jurisdiction over them. (Def.

Br. at 16–17.) They are incorrect. If the Court were to find that it lacks personal jurisdiction

over the Third Party Plaintiffs, the Court may not be able to bind the Third Party Plaintiffs with

its judgment, but the Court could nevertheless declare that the Luxalpha Third Party Writ, as

against the Trustee, violates the automatic stay, the Stay Orders, SIPA, and the Barton doctrine,

and is void ab initio, thus giving the Trustee the opportunity to apply to the Luxembourg court

for enforcement of that declaration. See Hobson v. Travelstead (In re Travelstead), 227 B.R.

638, 655 (D. Md. 1998).

The Bankruptcy Code vests the Bankruptcy Court with in rem jurisdiction over the

debtor’s “property, wherever located and by whomever held.” Picard v. Maxam Absolute Return

Fund, L.P. (In re Bernard L. Madoff Inv. Sec. LLC), 474 B.R. 76, 83 (S.D.N.Y. 2012) (“Maxam

II”) (quoting 11 U.S.C. § 541(a)). The automatic stay, the Stay Orders, SIPA, and the Barton

doctrine all serve to protect the bankruptcy court’s in rem jurisdiction over the debtor’s property.

Id. at 83. Finding a violation of the automatic stay, the Stay Orders, SIPA, and the Barton

doctrine is an exercise of the Bankruptcy Court’s in rem jurisdiction, while enjoining litigants, by

contrast, is an exercise of in personam jurisdiction. See id. at 84 (“this Court follows the many

other courts discussed above that have addressed the extraterritoriality of the automatic stay,

concluding that it protects a bankruptcy court’s in rem jurisdiction extraterritorially by way of in


5

personam jurisdiction over those who would take actions prohibited by the stay” (emphasis in

original)); Sinatra v. Gucci (In re Gucci), 309 B.R. 679, 683–84 (S.D.N.Y. 2004) (violation of

automatic stay not dependent on personal jurisdiction).

Accordingly, because violations of the automatic stay, the Stay Orders, SIPA, and the

Barton doctrine can be determined independently of whether the exercise of jurisdiction over a

party would satisfy the due process clause of the United States Constitution, the Bankruptcy

Court may declare the Luxalpha Third Party Writ, as against the Trustee, void ab initio and

violative of the automatic stay, Stay Orders, SIPA, and the Barton doctrine, without a finding

that the Third Party Plaintiffs are subject to the Court’s jurisdiction.1

II. STANDARD OF REVIEW

A. The Facts Must Be Construed in the Light Most Favorable to the Trustee

For the purpose of deciding this motion, the Court must consider the evidence presented

in the light most favorable to the Trustee. See Hoffritz for Cutlery, Inc. v. Amajac, Ltd., 763 F.2d

55, 57 (2d Cir. 1985)). Self-serving, conclusory declarations, such as those put forth by the

Third Party Plaintiffs, need not be given any weight. See Schenker v. Assicurazioni Genereali

S.p.A., No. 98 Civ. 9186(MBM), 2002 WL 1560788, at *3 (S.D.N.Y. July 15, 2002). Should the

Court find that it cannot establish personal jurisdiction over the Third Party Plaintiffs on the

record before it, the Court should grant limited jurisdictional discovery to the Trustee. See

APWU v. Potter, 343 F.3d 619, 627 (2d Cir. 2003) (“[A] court should take care to give the

plaintiff ample opportunity to secure and present evidence relevant to the existence of

1 The Third Party Plaintiffs cite Fotochrome, Inc. v. Copal Co., 517 F.2d 512, 516 (2d Cir. 1975), for the proposition that the automatic stay is inapplicable when the defendant lacks minimum contacts with the forum. (Def. Br. at 16.) However, because the automatic stay in its current form was passed after Fotochrome was decided, Fotochrome is inapposite. See Transmarittima Sarda Italnavi Flotte Ruiniti S.p.A. v. Foremost Ins. Co., 482 F. Supp. 110, 114 (S.D.N.Y. 1979) (explaining that expansion of automatic stay by Bankruptcy Reform Act of 1979 altered the premise upon which Fotochrome court’s opinion was based).


6

jurisdiction.” (internal quotations omitted)); Picard v. Magnify Inc. (In re Bernard L. Madoff Inv.

Sec. LLC), No. 10-05279 (BRL), 2012 WL 2254995, at *7–9 (Bankr. S.D.N.Y. June 15, 2012)

(permitting jurisdictional discovery to determine relevant jurisdictional facts). Because Littaye

and Delandmeter have submitted declarations attesting to facts relating to personal jurisdiction,

the Trustee should be allowed to cross-examine these witnesses via deposition to explore their

contentions and other jurisdictionally relevant subjects.2

B. The Prima Facie Standard Applies to the Third Party Plaintiffs’ Motion to Dismiss for Lack of Personal Jurisdiction

The Third Party Plaintiffs improperly attempt to raise the standard normally applied in

the context of a Rule 12(b)(2) motion to dismiss. (See Def. Br. at 10–11.) Overlooking a wealth

of authority to the contrary, they assert that the Trustee’s Rule 2004 investigation was akin to

jurisdictional discovery and, therefore, that he must make “an averment of facts” in addition to

the standard prima facie showing “by pleading in good faith legally sufficient allegations of

jurisdiction.” See Nelly de Vuyst, USA, Inc. v. Europe Cosmetiques, Inc., No. 11 CV 1491(VB),

2012 WL 246673, at *5 (S.D.N.Y. Jan. 6, 2012) (quoting Ball v. Metallurgie Hoboken-Overpelt,

S.A., 902 F.2d 194, 197 (2d Cir. 1990)). They are incorrect.

A Rule 2004 investigation is distinct from jurisdictional discovery. The Trustee’s broad

Rule 2004 discovery, consistent with the purpose of Bankruptcy Rule 2004, focused on

identifying estate property. In re Hilsen, No. 87-11261 (JMP), 2008 WL 2945996, at *4 (Bankr.

2 Although AML and Delandmeter moved to dismiss for lack of personal jurisdiction in both the adversary proceeding filed on November 23, 2010 (the “Trustee’s Luxalpha Action”) and in this proceeding, Littaye chose not to contest personal jurisdiction in the Trustee’s Luxalpha Action by the agreed-upon April 27, 2012 deadline for filing such a motion. See Picard v. UBS AG, Adv. Pro. No. 10-04285 (BRL) (Bankr. S.D.N.Y.), ECF Nos. 96, 99, 105. He has thus waived his right to contest personal jurisdiction, and should be estopped from contesting personal jurisdiction here. See Hamilton v. Atlas Turner, Inc., 197 F.3d 58, 61 (2d Cir. 1999); Mitchell v. Washingtonville Cent. Sch. Dist., 190 F.3d 1, 6–8 (2d Cir. 1999); Bruce Lee Enters., LLC v. A.V.E.L.A., Inc., No. 10 CIV 2333, 2011 WL 1327137, at *2–3 (S.D.N.Y. Mar. 30, 2011).


7

S.D.N.Y. July 25, 2008) (focus of Rule 2004 is “to discover information about estate property”).

Therefore, the basic prima facie standard—as opposed to the heightened averment of facts

standard—is appropriate, where the plaintiff has conducted a Rule 2004 investigation, but not

jurisdictional discovery. See, e.g., Picard v. Cohmad Sec. Corp. (In re Bernard L. Madoff Inv.

Sec. LLC), 418 B.R. 75, 79 (Bankr. S.D.N.Y. 2009) (noting that a plaintiff “need only make a

prima facie showing through its own affidavits and supporting materials” to survive a Rule

12(b)(2) motion where only Rule 2004 discovery had occurred); Savage & Assocs., P.C. v.

Banda 26, S.A. (In re Teligent, Inc.), No. 01-12974 (SMB), 2004 WL 724945, at *3–4 (Bankr.

S.D.N.Y. 2004) (applying a prima facie standard, without the need for an averment of facts,

where Rule 2004 discovery, but not jurisdictional or merits discovery, had occurred); Lipshie v.

AM Cable TV Indus., Inc. (In re Geauga Trenching Corp.), 110 B.R. 638, 647 (Bankr. E.D.N.Y.

1990) (until court requires an evidentiary hearing, plaintiff need only make a prima facie

showing by its pleadings and affidavits that personal jurisdiction exists).

That said, the Trustee has averred sufficient facts to establish jurisdiction over the

defendant. Not only are the allegations of his Luxalpha Amended Complaint an averment of

facts, but the Trustee also has submitted 898 pages of documentary evidence in support of his

petition.3 See Penguin Grp. (USA) Inc. v. Am. Buddha, 609 F.3d 30, 35 (2d Cir. 2010) (prima

facie standard can be satisfied through “an averment of facts”); In re Tamoxifen Citrate Antitrust

Litig., 262 F. Supp. 2d 17, 21 (E.D.N.Y. 2003) (plaintiff may freely attach affidavits and

3 The Trustee is entitled to rely on the jurisdictional allegations of the complaint. See Thomas v. Ashcroft, 470 F.3d 491, 495 (2d Cir. 2006). Nevertheless, he submits the documents supporting these allegations herewith in further support. Official Comm. of Unsecured Creditors v. Transpacific Corp. (In re Commodore Int’l, Ltd.), 242 B.R. 243, 252 (Bankr. S.D.N.Y. 1999), cited by the Third Party Plaintiffs, is inapposite. (Def. Br. at 11.) In Commodore, and in contrast to the Trustee’s investigation, Rule 2004 discovery was obtained after the plaintiff had initiated the adversary proceeding. 242 B.R. at 252. Commodore is contrary to the established rule that plaintiff need only make a prima facie showing of personal jurisdiction before jurisdictional or merits discovery has been conducted.


8

supporting materials in opposition to motion to dismiss for lack of personal jurisdiction, and

“[s]uch pleadings and affidavits must be construed in the light most favorable to the plaintiffs,

and all doubts must be resolved in plaintiffs’ favor”) (citing Hoffritz, 763 F.2d at 57)).

III. THE THIRD PARTY PLAINTIFFS’ PURPOSEFUL INTERFERENCE WITH THE ADMINISTRATION OF THE BLMIS ESTATE SUBJECTS THEM TO THE JURISDICTION OF THIS COURT

A. The Law Is Clear That an Action Affecting the Administration of the Bankruptcy Estate Subjects a Foreign Defendant to Jurisdiction

The Third Party Plaintiffs misconstrue the relevant test for jurisdiction in the context of a

claim to enforce the automatic stay and improperly focus on the test set forth in Calder v. Jones,

465 U.S. 783 (1984), which is the standard applied in intentional torts cases. (Def. Br. at 13–17.)

In the bankruptcy context, a foreign defendant may be subject to jurisdiction on the basis of an

act taken abroad that has “a substantial, direct and foreseeable effect on the administration of [the

bankruptcy] estate that 11 U.S.C. § 362(a) was designed to prevent.” LaMonica v. N. of Eng.

Protecting & Indem. Ass’n Ltd. (In re Probulk Inc.), 407 B.R. 56, 64 (Bankr. S.D.N.Y. 2009)

(finding court had personal jurisdiction to enjoin English defendants from terminating insurance

coverage due to the effect on the winding up of the debtor’s estate); see also In re Chiles Power

Supply Co., 264 B.R. 533, 543 (Bankr. W.D. Mo. 2001) (subjecting foreign defendants to

jurisdiction based on an action they brought in Canada against the debtor and its insurers in

violation of the bankruptcy court’s orders); Lykes Bros. Steamship Co. v. Hanseatic Marine

Service, GmbH (In re Lykes Bros. Steamship Co.), 207 B.R. 282, 287–88 (Bankr. M.D. Fla.

1997) (holding German defendant was subject to court’s jurisdiction because it seized the

debtor’s vessel to compel payment by debtor). “[B]y issuing process that violates a bankruptcy

court order, [the Third Party Plaintiffs are] affecting the very ability of the bankruptcy court to

govern such a liquidation and to fairly distribute same.” Chiles Power Supply, 264 B.R. at 543


9

(quoting U.S. Lines, Inc. v. GAC Marine Fuels Ltd. (In re McLean Indus. Inc.), 68 B.R. 690

(Bankr. S.D.N.Y. 1986)).4 The Luxalpha Third Party Writ clearly affects the ability of the

Trustee, and this Court, to efficiently administer the liquidation of the BLMIS estate.

B. The Luxalpha Third Party Writ Purposely Affects the Administration of the BLMIS Estate

The Third Party Plaintiffs contend that the sole purpose of the Luxalpha Third Party Writ

is to “protect [their] procedural rights in Luxembourg,” and not to recover assets from the

BLMIS estate. (Def. Br. at 16.) This assertion is unsupported by Luxembourg law and

contradicts the Luxalpha Third Party Writ itself.

Contrary to the Third Party Plaintiffs’ assertions, the Luxalpha Third Party Writ is not

necessary to protect their right to assert a defense based on BLMIS’s liability in the lawsuit filed

against them in Luxembourg by Luxalpha’s liquidators (the “Luxalpha Liquidator Action”).

Under Luxembourg law, the Third Party Plaintiffs can present facts relevant to any defense in the

Luxalpha Liquidator Action, including alleged liability of a third party, regardless of whether

that party is named as a defendant. (Declaration of Franz Schiltz, dated Sept. 24, 2012 (“Schiltz

Decl.”) ¶ 4.) Thus, the Third Party Plaintiffs may defend themselves against the Luxalpha

Liquidator Action by submitting evidence of BLMIS’s liability without joining BLMIS as a

party. (Id.)

Furthermore, the Luxalpha Third Party Writ, on its face, belies the Third Party Plaintiffs’

assertion that it is merely a procedural mechanism. The Luxalpha Third Party Writ specifically

seeks payment from the BLMIS estate for any amount for which the Third Party Plaintiffs are

4 The Third Party Plaintiffs’ reliance on cases arguing that jurisdiction should stem from the sole fact that the forum is the plaintiff’s place of residence is misguided. (Def. Br. at 15.) Jurisdiction here is not based on the Trustee’s place of residence, but on the effect on the bankruptcy court’s exclusive jurisdiction to govern the administration of the BLMIS estate.


10

found liable in the Luxalpha Liquidator Action, in addition to millions of dollars for personal

damages and litigation costs. (See Declaration of Gonzalo S. Zeballos, dated April 18, 2012, Ex.

B at Conclusory Section, ECF No. 4 (“Zeballos Decl.”).) According to the Luxalpha Liquidator

Action, the Third Party Plaintiffs are potentially liable for over a billion dollars in damages

caused to Luxalpha. (See Tr. Br. at 9 and n.8; Zeballos Decl. Ex. A at 122–23, 125–26.)

The Third Party Plaintiffs try to downplay the effect of the Luxalpha Third Party Writ on

the administration of the BLMIS estate by acknowledging that it is unlikely that they will collect

on any judgment issued in Luxembourg. (Def. Br. at 15–16.) However, the Luxalpha Third

Party Writ affects the orderly administration of the BLMIS estate simply by seeking the recovery

of estate assets and subjecting the Trustee to uncoordinated proceedings in Luxembourg. See

Underwood v. Hilliard (In re Rimsat, Ltd.), 98 F.3d 956, 961 (7th Cir. 1996) (an uncoordinated

proceeding in a different court “imperil[s] the orderly administration of the bankruptcy

proceeding” regardless of whether it directly threatens to deplete the estate). Moreover, the fact

that the Third Party Plaintiffs could seek to enforce an order from the Luxembourg court abroad

in other European jurisdictions clearly imperils the orderly administration of the BLMIS estate.

The Third Party Plaintiffs’ assertion that subjecting them to the jurisdiction of this Court

would violate due process is without merit. (Def. Br. at 16–17.) Due process is satisfied because

the Third Party Plaintiffs were aware of the BLMIS liquidation at the time they filed the

Luxalpha Third Party Writ and thus knew that the Luxalpha Third Party Writ would affect the

administration of the BLMIS estate. See Lykes Bros. Steamship Co., 207 B.R. at 287–88

(finding jurisdiction complied with due process because defendant’s seizure of estate property to

compel payment by debtor had a foreseen effect on the bankruptcy estate).


11

IV. LITTAYE’S AND DELANDMETER’S NUMEROUS CONTACTS WITH THE UNITED STATES ARE FULLY SUPPORTED BY DOCUMENTARY EVIDENCE AND DIRECTLY RELATE TO THE TRUSTEE’S CLAIMS

A. Littaye’s Substantial Contacts With the United States

The Third Party Plaintiffs would have this Court believe that Littaye’s only

jurisdictionally significant contacts are a few “short, informal courtesy visits” with Madoff.

(Def. Br. at 30–31.) They claim that all of the Trustee’s other allegations regarding Littaye are

either “conclusory,” “vague,” “untrue,” or of no jurisdictional relevance. (Def. Br. at 28–30.)

This is simply not true. As described in detail in the Trustee’s Application, and supported by

substantial documentary evidence, Littaye is subject to jurisdiction because he used his

longstanding relationship with Madoff to direct his clients’ investments into several BLMIS

accounts, including the Luxalpha account.5 (Tr. Br. at 31–34.) Littaye, along with the Access

International Advisors entities and affiliates that he controlled (collectively, “Access”),

substantially profited by directing Access’s clients to invest in these BLMIS accounts. (Id.)

Furthermore, Littaye was the primary contact for all of the BLMIS investment vehicles on

Access’s platform and charged himself with performing due diligence on these products (id. at

33,) a critical fact that the Third Party Plaintiffs do not refute.

5 In his declaration, Littaye attempts to downplay the nature of his relationship with Madoff, claiming that the two were merely “business acquaintances.” (Littaye Decl. ¶ 2.) Putting aside the ambiguity of the phrase “business acquaintances,” there is ample evidence of a long-standing and close relationship between Littaye and Madoff on which their business dealings were built. The calendars Madoff kept for the years 2005, 2007, and 2008 show numerous meetings between Littaye and Madoff, including dinners in both New York and in Paris, and at least one planned dinner with their spouses. (Supplemental Declaration of Gonzalo S. Zeballos, dated Sept. 24, 2012 (“Suppl. Zeballos Decl.”) Ex. 1 at MADTNN00116903, MADTNN00116906–07, MADTNN00117073, MADTNN00117082, MADTNN00117108, MADTNN00117008, MADTNN00117048, MADTNN00117050.) In addition, according to Philip Wogsberg, a former Access employee, Littaye visited Madoff on vacation in the South of France. (Zeballos Decl. Ex. O at 49:14–23.) These numerous meetings and social visits suggest a close relationship, one that served as the basis for their many business dealings. (See Suppl. Zeballos Decl. Ex. 2 at 52:14–25.)


12

The Third Party Plaintiffs erroneously claim that Littaye’s relationship with Madoff is not

relevant to the jurisdictional analysis and that Littaye’s role in opening numerous BLMIS

accounts is “hopelessly vague.” (Def. Br. at 28–29.) However, it is jurisdictionally significant

that Littaye used his relationship with Madoff to direct substantial investments into BLMIS in

New York through these numerous accounts. See Picard v. Maxam Absolute Return Fund, L.P.

(In re Bernard L. Madoff Inv. Sec. LLC), 460 B.R. 106, 117 (Bankr. S.D.N.Y. 2011) (“Maxam”)

(finding that as a result of the defendant’s “directing investments to the United States, the Court

cannot escape the conclusion that it has specific jurisdiction over [the defendant]”). According

to the BLMIS files, thirteen accounts, including Luxalpha’s, were collectively referred to by the

group name “Littaye,” as Littaye was listed as the introducing party for these accounts. (See

Amended Complaint ¶¶ 85–86, Picard v. UBS AG, No. 1:11-cv-04212, (S.D.N.Y. Aug. 17,

2011), ECF No. 23 (the “Luxalpha Am. Compl.”); Suppl. Zeballos Decl. Ex. 3; see, e.g., Suppl.

Zeballos Decl. Exs. 4–5.) In his correspondence with BLMIS, Littaye referred to these accounts

as belonging to his “clients” and he regularly received copies of their trade tickets and account

statements. (See, e.g., Suppl. Zeballos Decl. Exs. 6–8.) These facts, which Littaye does not

address in his declaration, clearly show his role in directing investments into BLMIS.

The Third Party Plaintiffs further claim that the Trustee has provided no facts or details to

support his assertion that “Littaye built Access’s business around his long-standing friendship

with Madoff.” (Def. Br. at 28.) However, ample support for this statement can be found in the

Trustee’s Application and the Luxalpha Amended Complaint, which describe how Littaye used

his relationship with Madoff to create and market several BLMIS feeder funds on Access’s

platform. (Tr. Br. at 32–33; Luxalpha Am. Compl. ¶¶ 85–88.) Each of these feeder funds,

including Luxalpha, held one of the thirteen “Littaye” BLMIS accounts described above. Access


13

was able to open and maintain these feeder fund accounts solely because of Littaye’s relationship

with Madoff; according to one former Access employee, Littaye maintained responsibility for

these accounts and was the primary—if not only—person at Access who had contact with

Madoff regarding these accounts. (Suppl. Zeballos Decl. Ex. 2 at 39:8–40:15.) These BLMIS

feeder funds accounted for a substantial portion of Access’s business, and, as of 2005, accounted

for 61% of Access’s total net revenue. (Luxalpha Am. Compl. ¶ 88; see also Suppl. Zeballos

Decl. Ex. 9 at 3.) As characterized by one Access employee, “[Littaye] had the relationship with

Madoff, [it] was a highly sensitive relationship, [and] it was the basis for the company’s cash

flow.” (Suppl. Zeballos Decl. Ex. 2 at 40:8–10.)

Citing no authority, the Third Party Plaintiffs assert that Littaye’s role in facilitating the

opening of these thirteen accounts could only be significant if he physically came to New York

to do so. (Def. Br. at 29.) This is incorrect. It is well-settled that a defendant may be subject to

jurisdiction for directing investments into the forum, even without actually entering the forum.

See Burger King Corp. v. Rudzewicz, 471 U.S. 642, 474–76 (1985) (“[J]urisdiction . . . may not

be avoided merely because the defendant did not physically enter the forum State.”); see also

Maxam, 460 B.R. at 117.

In any event, Littaye did come to New York to further Access’s relationship with Madoff.

The Trustee has offered ample evidence that Littaye had primary responsibility for Access’s

BLMIS products, including performing the ongoing monitoring and due diligence of BLMIS.

(Tr. Br. at 33.) To fulfill these due diligence and monitoring responsibilities, Littaye met with

Madoff at BLMIS’s offices in New York at least once a quarter. (Id.) Littaye does not dispute

that these meetings took place, but rather attempts to minimize their importance by

characterizing them as “short, informal courtesy visits,” during which he and Madoff only


14

engaged in “small talk.” (Def. Br. at 30; Littaye Decl. ¶¶ 12–13.) Littaye’s characterization of

his relationship with Madoff as being such that he can simply drop in on Madoff when he

happens to be in New York so that the two can engage in “small talk” belies Littaye’s previous

allegation that he and Madoff were merely “business acquaintances.” (See Littaye Decl. ¶¶ 2,

12–13.) The characterization of these meetings as “courtesy visits” directly contradicts the

testimony provided by Access employee Philip Wogsberg (“Wogsberg”), that Littaye would visit

Madoff to address any concerns that Wogsberg or others at Access had regarding the BLMIS

feeder funds. (Suppl. Zeballos Decl. Ex. 2 at 60:13–61:1.) Furthermore, considering that only a

select few ever met directly with Madoff, it does not appear plausible that Littaye would be able

to regularly stop by Madoff’s office for “small talk,” unless they were more than mere “business

acquaintances.” (See, e.g., id. at 53:25–54:14 (testifying that “Madoff wasn’t always available”

and that it was “looked at as a privilege” to get a meeting with him).)

The Third Party Plaintiffs not only misrepresent the substance of Littaye’s meetings with

Madoff, but also misconstrue the standard for determining the jurisdictional relevance of these

meetings. They assert that meetings in the forum are only relevant to the jurisdictional analysis

if they “substantially advance or are essential to the formation of a contract” and argue that the

meetings between Littaye and Madoff do not meet this standard because the two did not engage

in negotiations or enter into any contracts during these meetings. (Def. Br. at 30–32.) However,

the cases cited by the Third Party Plaintiffs are broader, pointing to the significance of meetings

to the development of a business or contractual relationship, which is clearly satisfied here. See

Cooper, Robertson & Partners, LLP v. Vail, 143 F. Supp. 2d 367, 372 (S.D.N.Y. 2001); Kahn


15

Lucas Lancaster, Inc. v. Lark Int’l Ltd., 956 F. Supp. 1131, 1136 (S.D.N.Y. 1997).6 The

Trustee’s Application proffers substantial evidence that Littaye’s meetings with Madoff were

essential to the development of their business relationship and are thus jurisdictionally

significant. (Tr. Br. at 33–34; Zeballos Decl. Ex. N at 40:22–24.)

In addition to the meetings with Madoff, the Trustee has provided ample evidence that

Littaye regularly traveled to New York to attend the Quarterly Strategic Meetings of Access

International Advisors, Inc. (“AIA Inc.”), a New York-based company of which Littaye was a

director, where he and other executives discussed the BLMIS products offered on Access’s

platform and made decisions regarding Access’s operational policies. (Tr. Br. at 34.) Littaye

does not refute his participation in these meetings. (Littaye Decl. ¶ 12.)

Littaye also conducted business in New York relating to his BLMIS accounts. He sent

faxes to BLMIS employees on letterhead for “Access International Advisors, 509 Madison

Avenue, 22nd Floor, Suite 2206, New York, N.Y. 10022.” (See, e.g., Suppl. Zeballos Decl. Exs.

7, 10–11.) Littaye received trade tickets and account statements for several of his BLMIS

accounts at an address in New York, including the trade tickets and account statements for

Luxalpha. (Suppl. Zeballos Decl. Exs. 8, 11.) Furthermore, he had business cards that listed him

at Access’s New York office, with a New York telephone number. (Suppl. Zeballos Decl. Ex.

12.) These numerous contacts subject Littaye to this Court’s jurisdiction.

6 The two other cases cited by the Third Party Plaintiffs are easily distinguished. In Current Textiles Corp. v. Ava Industries, Inc., 624 F. Supp. 819, 821 (S.D.N.Y. 1985), the court considered evidence of only one contact, a meeting in the forum that neither party asserted was relevant either to the formation of a contract or to the development of the business relationship. In Kash ‘n Gold, Ltd. v. ATSPI, Inc., 690 F. Supp. 1160, 1162–63, (E.D.N.Y. 1988), the court declined to assert specific jurisdiction based on two negotiations in the forum relating to a contract that was never formed.


16

B. Delandmeter’s Substantial Contacts With the United States

Although the Third Party Plaintiffs may attempt to minimize Delandmeter’s contacts with

New York, this Court has specific personal jurisdiction over Delandmeter because he

purposefully availed himself of the privilege of transacting business in New York and undertook

numerous actions in the state that were directed at maintaining and enhancing Access’s

relationship with BLMIS. As set forth in the Trustee’s Application, Delandmeter served as

Access’s legal advisor and served on the boards of several Access entities. (Tr. Br. at 34;

Zeballos Decl. Exs. K at 7; M at 7; O at 41:20–22; S; X at 3.) He frequently attended Access’s

business meetings and engaged in other BLMIS-related activities in New York, including

meeting with Madoff. (Id. at 35.) In addition, Delandmeter was among the incorporators of

Luxalpha and served on the fund’s board of directors. (See Suppl. Zeballos Decl. Exs. 13 at 7;

15 at 7; 15 at 1.) As the Trustee thus has shown, Delandmeter’s participation in meetings in New

York to conduct Access’s and Luxalpha’s business was not incidental, as the Third Party

Plaintiffs suggest, but rather was continuous and essential to the success of Access and Luxalpha.

As the Trustee has set forth, and Delandmeter has not refuted, Delandmeter regularly

attended meetings in New York to participate in and present at Access’s Quarterly Strategic

Meetings. (See Tr. Br. at 35; Zeballos Decl. Exs. O at 41:23–42:5; U.) Although the Third

Party Plaintiffs attempt to couch these regular meetings as “occasional[],” suggesting that they

were merely incidental to other business that Delandmeter was conducting in New York, they do

not refute the Trustee’s allegations of regular meetings. (See Def. Br. at 30.) Nor do the Third

Party Plaintiffs refute that Delandmeter met with Madoff in New York. Instead, Delandmeter

attempts to paint this meeting as a mere “shake hands” meeting. (Delandmeter Decl. ¶ 6.) No

matter how he characterizes this meeting, Delandmeter cannot and does not refute that he was

one of the privileged few to meet with Madoff in Madoff’s New York office. Unable to refute


17

the Trustee’s allegations, the Third Party Plaintiffs merely attempt to paint them in a light

favorable to themselves, despite the requirement that the facts be viewed in the light most

favorable to the Trustee. See Hoffritz, 763 F.2d at 57.

Additionally, Delandmeter, like Littaye, is subject to this Court’s jurisdiction because he

directed investment activity into the forum. See Maxam, 460 B.R. at 117. The Trustee has

demonstrated that Delandmeter undertook numerous actions in New York that were purposefully

directed at maintaining and enhancing Access’s relationship with BLMIS. (Tr. Br. at 34–35.)

Delandmeter was a director of AIA Inc., a New York-based company, as early as June 2003, as

well as a director of several other Access entities.7 Delandmeter also served as a director of

Luxalpha and was its legal advisor from 2003 until November of 2008. (Suppl. Zeballos Decl.

Exs. 13 at 7; 14 at 7.)

As the Trustee has shown, Delandmeter’s role was more than that of an outside lawyer or

legal consultant. He was involved in nearly every major decision regarding Luxalpha from the

fund’s inception through its collapse. Delandmeter, with UBS (Luxembourg) S.A. (“UBS SA”),

established Luxalpha’s articles of incorporation. (Suppl. Zeballos Decl. Ex. 15 at 1.) He also

executed a resolution that authorized Luxalpha’s relationship with Madoff in New York and the

delegation of asset management and custodial authority to BLMIS. (Suppl. Zeballos Decl. Ex.

16 at 2–4.) As a Luxalpha board member, Delandmeter executed resolutions that approved and

amended sales prospectuses that concealed Madoff’s role as actual custodian and asset manager

(id. at 2; Suppl. Zeballos Decl. Ex.17; see, e.g., Suppl. Zeballos Decl. Ex. 13), and authorized the

approval of Luxalpha’s financial statements despite knowing that these documents did not

7 In addition, Delandmeter served as a director for several other Access entities, including Access International Advisors (Luxembourg) S.A. (“AIA (Lux)”), AML, and Access Partners S.A. (“APSA”), and as Access’s Luxembourg counsel. (Tr. Br. at 34.)


18

disclose Madoff’s role as custodian and asset manager (see Suppl. Zeballos Decl. Ex. 18; see,

e.g., Suppl. Zeballos Decl. Ex. 19).

Through his role on the “Advisory Committee” for UBS Third Party Management

Company S.A. (“UBSTPM”), Delandmeter also was involved in “determining the investment

policy of [Luxalpha],” the “purchase and sale of investments in accordance with [Luxalpha’s]

investment policy,” and “any matters in relation to which the Prospectus provides for the

Management Company, or its delegates, to take a decision,” to name just a few duties. (Suppl.

Zeballos Decl. Ex. 20.) His prominent role in directing Luxalpha’s response to Madoff’s arrest

and the collapse of BLMIS also illustrates his high level of involvement with Luxalpha. A few

days after Madoff’s arrest, Delandmeter notified the key Luxalpha players of Luxalpha’s

suspension and the need to notify the Luxembourg financial regulator. (Suppl. Zeballos Decl.

Ex. 21.) Post-collapse, Delandmeter participated in three days of Luxalpha board meetings,

which addressed notification to the Luxembourg financial regulator, treatment of redemptions,

and potential legal action and exposure. (Suppl. Zeballos Decl. Exs. 22–24.) During the course

of these meetings, Delandmeter and the Luxalpha board discussed a “partial payment request” of

five million euros that Delandmeter submitted on behalf of the “Delandmeter Law Firm” to

Luxalpha—demonstrating the significant amounts of transfers he appears to have received from

the fund. (See Suppl. Zeballos Decl. Ex. 24 at 3.)

Delandmeter asserts that he was not involved in Luxalpha’s “day-to-day business

matters” because “[u]nder Luxembourg law . . . a legal advisor who sits on a board does not

engage” in such matters. (Delandmeter Decl. ¶ 4.) Regardless of Luxembourg law on legal

advisors, it is clear from the evidence that Delandmeter did in fact engage in the day-to-day

business of Luxalpha, as well as the Access entities on whose boards he served. Likewise,


19

Delandmeter’s consistent participation in the Quarterly Strategic Meetings in New York and his

meeting with Madoff in New York were not isolated, casual encounters. Delandmeter had a

vested interest in Luxalpha’s and Access’s success given his role as a director of Luxalpha, AIA

Inc., and several of the other Access entities. These contacts, which were essential to the

continuance of Access’s and Luxalpha’s business relationship with BLMIS, demonstrate

Delandmeter’s purposeful direction of investment activity to New York and subject Delandmeter

to the Court’s jurisdiction.

C. The Trustee’s Claims Arise out of Littaye’s and Delandmeter’s Contacts With the United States

Although the Third Party Plaintiffs claim otherwise, the Trustee’s Application arises out

of Littaye’s and Delandmeter’s contacts with the United States. In the context of the automatic

stay, the relevant analysis is whether Littaye’s and Delandmeter’s contacts with the United States

relate to the cause of action that the Trustee claims is a violation of the automatic stay, in this

case, the Luxalpha Third Party Writ. See U.S. Lines, 68 B.R. at 698; see also Maxam, 460 B.R.

at 118; Williams v. Law Soc’y of Hong Kong (In re Williams), 264 B.R. 234, 240–41 (Bankr. D.

Conn. 2001). It is not, as the Third Party Plaintiffs mistakenly argue, whether these contacts are

relevant to the merits of the injunction action itself. (Def. Br. at 32–33.) The Third Party

Plaintiffs further misconstrue the analysis by focusing solely on the Trustee’s allegations

regarding the meetings that Littaye and Delandmeter attended in New York. (Id. at 30–33.) All

of Littaye’s and Delandmeter’s contacts with the forum that the Trustee has alleged—including

their purposeful direction of investments to BLMIS—should be considered.

The Third Party Plaintiffs contend that there is a split in the circuits as to whether

relatedness is determined by a “but for” or a “proximate cause” test. (Id. at 30–31.) However,

they fail to cite a single case that offers guidance as to how the Second Circuit interprets this


20

standard. (See id.) The Third Party Plaintiffs rely on Chew v. Dietrich, 143 F.3d 24 (2d Cir.

1998), to assert that the Second Circuit has adopted a sliding-scale test to determine specific

jurisdiction. (Def. Br. at 31.) However, the court in Chew, which actually analyzed personal

jurisdiction in the context of First Circuit jurisprudence, did not claim to adopt any specific test

for either the First or Second Circuits. Chew, 143 F.3d at 26, 29–31. Similarly, in SongByrd,

Inc. v. Estate of Grossman, 206 F.3d 172, 180–81 (2d Cir. 2000), relied on by the Third Party

Plaintiffs, the Second Circuit considered whether the defendant was subject to specific

jurisdiction in Louisiana. In the third case, Porina v. Marwood Shipping Co., 521 F.3d 122,

128–29 (2d Cir. 2008), the court considered only whether the defendant was subject to general

jurisdiction, not specific jurisdiction.

The correct standard used in the Second Circuit to determine whether a cause of action

arises out of or relates to a defendant’s contacts requires a varying degree of “relatedness”

depending on the “overall picture” of defendant’s contacts with the forum. See Maxam, 460

B.R. at 118 n.3 (quoting Del Ponte v. Universal City Dev. Partners, Ltd., No. 07-CV-2360, 2008

WL 169358, at *10 (S.D.N.Y. Jan. 16, 2008)). As explained in the Trustee’s Application, the

Luxalpha Third Party Writ is so closely related to Littaye’s and Delandmeter’s efforts to direct

investments to BLMIS that there is no question that they are subject to the specific jurisdiction of

this Court under any formulation of the relatedness test. (Tr. Br. at 36); see Maxam, 460 B.R. at

118 & n.3 (describing Second Circuit “relatedness” standard and exercising personal jurisdiction

over foreign defendants that “intentionally channeled investor money into the BLMIS Ponzi

scheme”); Picard v. Chais (In re Bernard L. Madoff Inv. Sec. LLC), 440 B.R. 274, 279–80 & n.3

(Bankr. S.D.N.Y. 2010) (describing Second Circuit “relatedness” standard and finding Trustee

had established prima facie showing of specific jurisdiction where claims were “inextricably


21

related” to foreign defendant’s contacts with forum and would not have arisen “but for” contacts

with forum).

V. THE COURT HAS PERSONAL JURISDICTION OVER AML

The Third Party Plaintiffs argue that AML is not subject to jurisdiction in the United

States because the Trustee has only offered “vague conclusions” that lack evidentiary basis.

Their argument ignores the detailed evidence put forth by the Trustee demonstrating AML’s

contacts with New York and the United States. (Tr. Br. at 27–31, 40–44.) AML served in

various management and advisory roles for BLMIS feeder fund Luxalpha, purposefully directing

investment activity to BLMIS in New York. As described below, these contacts with the forum

go back to 2004, making the Third Party Plaintiffs’ suggestion that AML serviced Luxalpha for

“less than a month” disingenuous at best. AML is also subject to jurisdiction because the

contacts of Access’s New York office should be imputed to it under well-settled principles of

agency and mere department jurisdiction. AML was little more than a shell company operated at

the direction of Access’s New York office, and its co-founders Littaye and Thierry Magon de la

Villehuchet (“Villehuchet”), and Access’s New York office performed work for AML that it

could not perform. Further, Littaye and Villehuchet commonly owned AML, along with the

other Access entities and affiliates, and managed Access’s worldwide business as a tightly-

controlled single enterprise based in New York and operated to direct investments to New York

and the United States.

A. AML Served Various Management and Advisory Roles for Luxalpha, Directing Investment Activity to the United States and Giving Rise to Personal Jurisdiction

1. AML and Its Predecessor Serviced Luxalpha as Early as 2004

The Third Party Plaintiffs’ submission that AML maintained contacts with BLMIS in

New York for “less than a month” before Madoff’s fraud was revealed is misleading. (Def. Br.


22

at 17.) AML and its predecessor entity, AIA (Lux), maintained jurisdictionally significant

contacts with New York and the United States from as early as 2004 through the collapse of

BLMIS in 2008. AML was used by Access—and its principals Littaye and Villehuchet—to

serve various management and advisory roles with respect to Luxalpha, as well as with regard to

other BLMIS feeder funds. Through these ongoing roles, AML played a key part in Access’s

business operation, which served as a bridge between European investors and BLMIS in New

York. AML’s continuous servicing of BLMIS feeder funds gave rise to contacts with the United

States, enabling this Court to exercise personal jurisdiction over AML.

AML’s predecessor entity, AIA (Lux), served as Luxalpha’s official portfolio advisor

upon the fund’s inception in February 2004, until August 2004. (See Luxalpha Am. Compl. ¶

26; Suppl. Zeballos Decl. Ex. 25.) As portfolio advisor, AIA (Lux) was tasked with compliance

with the “investment restrictions” applicable to Luxalpha and the “surveillance and constant

review” of Luxalpha’s assets—assets that were, of course, invested entirely with BLMIS in New

York. (Id. at 3–4.) Further, AIA (Lux) was entitled to collect fees in exchange for serving these

roles. (See id. at 4.)

AIA (Lux) also served as official investment advisor for another Access-created BLMIS

feeder fund, Groupement Financier Ltd. (“Groupement”) beginning in 2003 and continuing

through 2007, when its role was replaced in 2007 by another Luxembourg-based Access entity,

APSA. (See Suppl. Zeballos Decl. Exs. 26; 27 at 2.) As Groupement’s investment advisor, AIA

(Lux) was required to advise Groupement on matters relating to its portfolio and investment

objectives, and was entitled to receive both an advisory fee and performance fee for its services.

(Suppl. Zeballos Decl. Ex. 26 at 1–2, Appendix 1–2.) Like Luxalpha, Groupement was entirely

invested with BLMIS in New York. (See Luxalpha Am. Compl. ¶¶ 260–62.)


23

2. AML Became Luxalpha’s Manager in 2008 After UBS Raised Concerns About the Fund and Closed the Fund to New Subscriptions

In early 2008, AML agreed to take over the management company responsibility for

Luxalpha, a task that had previously been performed by Luxembourg-based UBS entities since

Luxalpha’s inception in 2004. AML undertook this role after UBS’s internal auditors expressed

concerns about Luxalpha. In March 2007, UBS AG risk controllers performed an audit on

Luxalpha. (Suppl. Zeballos Decl. Ex. 28.) The audit was problematic; UBS AG shut down new

investments in Luxalpha for nearly a year while the audit was underway, and “UBS nearly gave

up” on Luxalpha. (Id.; Suppl. Zeballos Decl. Ex. 29.) However, after AML proposed to take

over the management company responsibility from UBS, Luxalpha was re-opened to new

subscriptions in January 2008, enabling Access to continue to draw profits from its relationship

with Madoff. (See id.)

As AML admits in the Luxalpha Third Party Writ, in January 2008, Delandmeter

requested from the Luxembourg financial regulator an amendment to the authorization for AIA

(Lux) so that it could serve as Luxalpha’s manager. (Zeballos Decl. Ex. B. § 1.6.) Further, as

AML states in its pleading, “[i]t was in that context and with that purpose that [AIA (Lux)]

changed its name to [AML].” (Id.) In September 2008, Delandmeter wrote again to the

Luxembourg financial regulator, describing that AML would be responsible for selecting a

certain U.S-based broker-dealer and executing that broker-dealer’s investment strategy. (Id. §

1.7) AML thus stated that it would be the entity managing the investment strategy of a U.S.


24

broker-dealer responsible for Luxalpha’s assets—activity that on its face creates contacts with

the United States. As AML admits in its pleading, this U.S. broker-dealer was Madoff.8 (Id.)

Based upon Delandmeter’s assurances, the Luxembourg financial regulator approved

AML’s role as Luxalpha’s manager in September 2008. (Suppl. Zeballos Decl. Ex. 30.)

Luxalpha and AML then negotiated a formal Management Company Services Agreement.

(Littaye Decl. Ex. 1.) This agreement charged AML with numerous management

responsibilities—including the official duty to “manage the investment and re-investment” of

Luxalpha’s assets, to “distribute, market, and promote” Luxalpha, and to “solicit and transmit

subscription orders.” (Id. §§ 5.1, 8.1.) In exchange, AML was entitled to receive from Luxalpha

fees based on the performance of the fund’s trading assets. (Id. at Schedule 1.) Through this

relationship, AML directed investment activity to BLMIS in New York.

3. AML’s Roles and Functions With Respect to Luxalpha and BLMIS Give Rise to Specific Jurisdiction

By virtue of its multiple, long-standing contacts with New York relating to Luxalpha and

other BLMIS feeder funds, AML directed investment activity to this forum, giving rise to

specific jurisdiction over it. See Maxam, 460 B.R. at 117 (finding that as a result of the

defendant’s “directing investments to the United States, the Court cannot escape the conclusion

that it has specific jurisdiction over [the defendant]”); Chais, 440 B.R. at 278 (noting that

“foreign defendants who profited by their maintenance of BLMIS accounts and receipt of

transfers subjected themselves to personal jurisdiction of this Court with regard to the Trustee’s

claims arising from such transfers” (citing Cohmad, 418 B.R. 75)); Cromer Fin. Ltd. v. Berger,

8 Delandmeter’s representations to the Luxembourg financial regulator—highlighted by the Third Party Plaintiffs in the Luxalpha Third Party Writ—undermine Littaye’s declaration in this proceeding that “AML conducted no business in the United States and had no contracts with U.S. brokers.” (Littaye Decl. ¶ 3.)


25

137 F. Supp. 2d 452, 476 (S.D.N.Y. 2001) (holding that sufficient minimum contacts existed

where defendant “signed a contract to serve as the administrator of a Fund which, while

technically operating as an offshore-fund, was entirely managed out of New York”).

It is of no moment that AML never invested directly in BLMIS or had a direct contract

with BLMIS. (See Def. Br. at 17–18.) AML contracted with, and serviced, Luxalpha, in

conjunction with Access’s New York headquarters,9 to maintain the business relationship by

which Access could operate, administer, and direct investor money into Luxalpha, which was

fully invested in BLMIS in New York. This activity created contacts with New York and the

United States, out of which the Luxalpha Third Party Writ that the Trustee now seeks to enjoin

arose. See Chais, 440 B.R. at 279–80 (exercising jurisdiction where the defendant’s “contacts

with the forum and the Trustee’s claims are inextricably related such that but for [the defendant’s

contacts with the forum] there could be no . . . claims against [the defendant]”); Maxam, 460

B.R. at 118 (finding that Trustee’s claims “arise out of or relate to . . . contacts with the United

States,” because without defendant “transferring assets to and from the United States, there could

not be claims . . . against it” (internal quotations omitted)); Newbro v. Freed, 337 F. Supp. 2d

428, 433 (S.D.N.Y. 2004) (finding “articulable nexus between [defendants’] New York contacts

and the underlying claims in the litigation,” where claims “arose from a chain of events which

included” defendants’ New York contacts).

The Third Party Plaintiffs’ citations to additional cases in which courts have not found

jurisdiction are unpersuasive, as none of those cases presents situations, where, as here, the

parties at issue maintained sufficient contacts with the forum relating to the claims at issue.

9 As detailed in the following sections concerning agency and mere department jurisdiction, AML was little more than a shell corporation with no real employees, and could not have existed without the work performed for it by Access’s New York office.


26

(Def. Br. at 18.) In Access Telecom, Inc. v. MCI Telecomms. Corp., the Fifth Circuit held that a

Mexican phone company could not be subject to general jurisdiction in the United States based

on the fact that its phone lines were connected with phone lines in Texas, where U.S. carriers

received money for the U.S. leg of the call and the Mexican company received money for the

Mexican leg of the call. 197 F.3d 694, 717 (5th Cir. 1999). In RAR, Inc. v. Turner Diesel, Ltd.,

the Seventh Circuit held that a Scottish corporation could not be subject to jurisdiction in Illinois

based only on prior contacts with an Illinois party that were unrelated to the subject matter of the

dispute. 107 F.3d 1272, 1277–79 (7th Cir. 1997). And in Tamam v. Fransabank Sal, the court

found that specific jurisdiction could not be sustained over foreign banks alleged to have

financed terrorism, where such banks maintained correspondent accounts in the United States but

there was no credible allegation that these United States accounts had been used to finance

terrorism. 677 F. Supp. 2d 720, 726–30 (S.D.N.Y. 2010). In contrast to these cases, AML and

its predecessor AIA (Lux) knowingly entered into agreements with BLMIS feeder fund Luxalpha

and other BLMIS feeder funds, and agreed to receive fees in exchange for the purposeful and

knowing direction of investments into New York. AML’s actions create meaningful contacts

with this forum, and it is entirely proper for the Court to exercise jurisdiction over AML in an

action arising from these contacts.

4. AML Is Also Subject to Jurisdiction Because Access’s New York Office Acted as Its Agent in New York

a. AML Was Little More Than a Shell Corporation Operating at the Direction of Access’s New York Office, With the Purpose of Facilitating Investments into BLMIS

The Third Party Plaintiffs also argue that AML cannot be charged with the actions of its

New York affiliates as a result of their agency relationship. (Def. Br. at 19–23.) But these

arguments obscure a basic reality—that AML was a shell corporation operated at the direction of


27

Access’s New York office and Access principals Littaye and Villehuchet in order to facilitate the

direction of investment activity to BLMIS in New York. Although AML had legal counsel in

Luxembourg—Delandmeter and his law firm—as well as a board of directors, it appears to have

had no employees and performed no meaningful work. This is supported by far more than

“vague conclusions.” (Def. Br. at 20.) Access’s own documents confirm this reality. For

example, a September 2004 questionnaire completed by Access states that AIA (Lux) has “no

regular employees” and that its directors and/or officers carry out its responsibilities. (Suppl.

Zeballos Decl. Ex. 31 at 7–8.) The areas of trading, research and development, IT/Programming,

administration, marketing and business development are all “outsourced,” with only “reporting,

performance analysis” performed by Littaye and compliance performed by Delandmeter. (Id.)

Likewise, a 2008 report notes that Access had offices in New York, London, Paris, and

Luxembourg, but that “Luxembourg is only a legal entity.” (Suppl. Zeballos Decl. Ex. 32 at 13.)

A 2008 contact list for various Access entities, including AML, shows only Littaye with a phone

number associated with AML, and lists only Littaye and Delandmeter with any Luxembourg

contact information. (Zeballos Decl. Ex. R.) Access’s own marketing materials confirm that

Access’s business purpose was the management of a “platform of US hedge funds” that “invest

predominantly in US assets in the USA.” (Zeballos Decl. Ex. J at 4.) Rather than an

independent Luxembourg business, AML appears to have been little more than a legal entity set

up to allow Access to operate Luxembourg-based funds invested in the United States, such as

Luxalpha, and earn fees from their operation.

Notably, the sparse, generalized declarations of Littaye and Delandmeter submitted in

opposition to the Trustee’s moving papers do little to alter the finding that AML was a shell.

Littaye states that AML’s board “conducted its business exclusively” in Luxembourg, but does


28

not describe what this “business” was, or if the board actually ever met in Luxembourg. (Littaye

Decl. ¶ 9.) Similarly, Delandmeter describes that he prepared and signed Luxalpha’s board

resolutions, but is silent as to the substance of any meetings he attended during his service on

Luxalpha’s board. (Delandmeter Decl. ¶ 8.) Littaye also declares that AML had a “three-person

management team,” as well as office space in Luxembourg, but does not describe any work the

management team did, or if any regular work was ever conducted in the Luxembourg office.

(Littaye Decl. ¶¶ 8, 10.) And Littaye further describes how AML earned its own fee revenue and

had a separate bank account in its own name, but does not state that AML’s revenue was retained

by AML instead of being subsequently transferred to entities controlled by Access’s New York

office or its founding principals Littaye and Villehuchet. (Id. ¶¶ 6–7.) In short, the Third Party

Plaintiffs’ submissions fall well below the standard of “direct, highly specific, testimonial

evidence” presented by a defendant and not countered by the plaintiff required to refute the

plaintiff’s allegations. See Schenker v. Assicurazioni Genereali S.p.A., No. 98 Civ. 9186(MBM),

2002 WL 1560788, at *3 (S.D.N.Y. July 15, 2002).

The Third Party Plaintiffs also devote substantial space in their opposition to countering

the Trustee’s assertion that AML’s management duties for Luxalpha, including risk management

and due diligence, were actually performed by Access’s New York office. (Def. Br. at 19, 22–

23.) As the Trustee has shown, AML was obligated to perform these duties, but such functions

were carried out by Access’s New York office. The Management Company Services Agreement

between Luxalpha and AML tasked AML with management of “the investment and re-

investment of the investments with a view to achieving the current investment objective and

policies and the investment restrictions [of Luxalpha].” (Littaye Decl. Ex. 1 § 5.1.) Predecessor

AIA (Lux)’s roles included the monitoring of Luxalpha’s investment restrictions and review of


29

Luxalpha’s assets. (Suppl. Zeballos Decl. Ex. 25 at 3–4.) AML’s functions, therefore,

necessarily required monitoring the Luxalpha assets managed by BLMIS, as well as BLMIS’s

ostensible compliance with the detailed investment restrictions contained in Luxalpha’s sales

prospectuses. (See, e.g., Suppl. Zeballos Decl. Ex. 14 at 18–23.)

The Rule 2004 examination testimony of two former employees of Access’s New York

office, Wogsberg and Ted Dumbauld (“Dumbauld”), makes clear that these functions were in

fact carried out in New York. Wogsberg testified that Tim Ng of Access’s New York office,

along with Littaye, examined Madoff’s performance strategy in light of “market conditions” and

checked whether Madoff was “moving the strikes up or down.” (Zeballos Decl. Ex. O at 57:9–

25.) Wogsberg and Dumbauld also testified about how the New York office prepared a risk

report for clients that identified the stocks and options that were said to be in BLMIS’s portfolio,

and which was based upon information retrieved from a “special mailbox” near Madoff’s New

York office. (Zeballos Decl. Exs. N at 22:13–23:10; O at 58:2–16.) Wogsberg further testified

that Littaye would come to New York to meet with Madoff for the purpose of “monitoring

visits,” accompanied at times by Villehuchet of Access’s New York office and Delandmeter.

(Zeballos Decl. Ex. O at 39:3–12, 41:3–22.) It does not help the Third Party Plaintiffs for

jurisdictional purposes that Access entirely failed in its due diligence responsibilities. (Def. Br.

at 20–21; see also Luxalpha Am. Compl. ¶¶ 201–208.) Access’s misconduct was committed in

large part in New York, and it is reasonable to subject it and its component entities to suit in this

forum.

b. The Jurisdictional Contacts of Access’s New York Office Should Be Imputed to AML Because of Their Agency Relationship

As described above, AML was a Luxembourg-based entity with no real employees and

no meaningful office space, established and operated in Luxembourg at the direction of Access’s


30

New York office, which also performed duties for AML that AML could not perform itself. “To

establish that a corporation doing business in New York is an agent of a related foreign

corporation, the plaintiff must show that the former does all the business which [the foreign

corporation] could do were it here by its own officials.” Dorfman v. Marriott Int’l Hotels, Inc.,

No. 99 CIV 10496, 2002 WL 14363, at *3 (S.D.N.Y. Jan. 3, 2002) (citation and internal

quotations omitted) (alteration in original). The Second Circuit has stated that the New York

entity must “render[] services on behalf of the foreign corporation that go beyond mere

solicitation and are sufficiently important to the foreign entity that the corporation itself would

perform equivalent services if no agent were available.” Wiwa v. Royal Dutch Petroleum Co.,

226 F.3d 88, 95 (2d Cir. 2000). The services provided by Access’s New York office rise to this

level, such that the contacts of Access’s New York office should be imputed to AML.

Moreover, an agency relationship also exists between entities “engaged in a single

business enterprise that relies on the joint efforts” of each of the entities, which are “coordinated

and controlled” by the parent entity. Dorfman, 2002 WL 14363, at *11; see also Bialek v. Racal-

Milgo, Inc., 545 F. Supp. 25, 32–33 (S.D.N.Y. 1982) (sustaining jurisdiction over foreign

affiliate of domestic corporation where both were “components of a tightly-knit commercial

organization of common-owned entities”). This is particularly so for investment firms such as

Access, where “subsidiaries are created by the parent, for tax or corporate finance purposes, to

carry on business on its behalf,” such that “there is no basis for distinguishing between the

business of the parent and the business of the subsidiaries.” Ginsburg v. Gov’t Prop. Trust, No.

07 Civ. 365 (CSH) (ECF), 2007 WL 2981683, at *7 (S.D.N.Y. Oct. 10, 2007) (internal

quotations omitted). As set forth in detail in the Trustee’s Application, Access’s New York

office, and its overseas affiliates, including AML, operated and held themselves out as a single


31

business enterprise managed out of New York and controlled by Littaye and Villehuchet, further

supporting the agency finding. (Tr. Br. at 43–44.)10

The Third Party Plaintiffs nonetheless argue that the Trustee cannot sustain jurisdiction

against AML on the basis of agency, claiming that the Trustee must satisfy additional

requirements that are part of a purported “four requirement” standard for agency jurisdiction.

(Def. Br. at 19–20.) The Third Party Plaintiffs’ argument is a distortion of relevant law, as none

of the cases they cite actually contain this purported four-step standard. However, even if the

Court were to examine these four considerations, they would not alter the conclusion that AML

is subject to agency jurisdiction.

First, the Third Party Plaintiffs argue that the Trustee must demonstrate that Access’s

New York office rendered services to AML that go beyond mere solicitation and are sufficiently

important to AML that AML itself would perform such services if no agent were available. (Id.

at 20–21.) As described above, Access’s New York office did render these services to AML.

Second, the Third Party Plaintiffs argue that Access’s New York office must have been primarily

engaged by AML and not engaged in similar services for other clients. (Id. at 20–21 (citing

Wiwa, 226 F.3d at 95).) This concept appears in agency cases where a New York independent

contractor performs services for numerous foreign clients. See Wiwa, 226 F.3d at 95

(“independent contractors with many clients are not considered agents of their individual clients

for jurisdictional purposes”). However, the relationship between Access’s New York office and

10 The Third Party Plaintiffs argue that “allegations intended to show that a business ‘is not operated as numerous separate entities, but as one integrated entity’” are insufficient to make out a prima facie case for agency jurisdiction. (Def. Br. at 22 (citing Tese-Milner v. De Beers Centenary A.G., 613 F. Supp. 2d 404 (S.D.N.Y. 2009)).) In Tese-Milner, the court declined to find agency jurisdiction where plaintiff’s allegations “merely restate[d], with slight changes, the legal standard for agency” and were “absent supporting facts.” Id. at 416. In contrast, the Trustee has provided detailed evidence of the manner in which Access operated as a single business enterprise. (See, e.g., Tr. Br. at 43–44.)


32

AML was not one of independent contractor and client—rather, they were closely related parties

with common owners and common management, making this “requirement” inapposite. Third,

the Third Party Plaintiffs argue that AML as principal must exercise some degree of control over

Access’s New York office as agent—rather than Access’s New York office exercising control

over AML. (Def. Br. at 20.) But this level of formality is not required, as “[t]he interrelatedness

of the corporations is the factor on which the courts have focused, rather than on the ‘control’ of

one by the other.” Palmieri v. Estefan, 793 F. Supp. 1182, 1193 (S.D.N.Y. 1992). Fourth, the

Third Party Plaintiffs argue that Access’s New York office must have authority to bind AML.

(Def. Br. at 20.) This factor is easily satisfied, as the evidence described above establishes that

AML served as little more than a shell corporation operating at the direction of Access’s New

York office.

B. AML Was a Mere Department of Access’s New York Office, Subjecting It to the Court’s General Jurisdiction

The Court may exercise jurisdiction over AML for the additional reason that it was a

mere department of Access’s New York office. As acknowledged by the Third Party Plaintiffs,

courts consider four factors when determining whether an entity is a mere department of another

entity. (Def. Br. at 23); Erick Van Egeraat Associated Architects B.V. v. NBBJ LLC, No. 08 Civ.

7873, 2009 WL 1209020, at *2 (S.D.N.Y. Apr. 29, 2009). Contrary to the Third Party Plaintiffs’

contentions, each of these factors weighs in favor of the exercise of a finding that AML was a

mere department of Access’s New York office.

The first factor, common ownership, is satisfied because Access’s New York office and

AML were commonly owned by the same two parties: Littaye and Villehuchet. Two entities

comprised Access’s New York office: AIA LLC and AIA Inc. AIA LLC was a 100%-owned

subsidiary of AIA Inc. (Zeballos Decl. Ex. I ¶ 2.1.) AIA Inc. itself was ultimately owned by


33

Littaye and Villehuchet; together, they were the ultimate exclusive or near-exclusive

shareholders of AIA Inc. until it dissolved in July 2010. (Zeballos Decl. Exs. CC, HH.)

Villehuchet directly owned his shares of AIA Inc. (See Zeballos Decl. Ex. AA.) Littaye owned

his shares through intermediaries—first through EarthStreet Ltd. (“EarthStreet”) and later

through Dalestrong Ltd. (“Dalestrong”)—both entities that he controlled. (Zeballos Decl. Exs.

CC, HH, GG at 2.) Although Access principal Dumbauld appears to have possessed up to a 4%

stake in AIA Inc. for a period of time (see Zeballos Decl. Ex. HH), this means that Littaye and

Villehuchet possessed between a 100% and 96% share in AIA Inc., and thus in Access’s New

York office—a share far greater than the “any combined ownership interest greater than 50%”

figure that the Third Party Plaintiffs suggest. (Def. Br. at 24.)

AML was at all times ultimately majority owned by Littaye and Villehuchet. When AIA

(Lux) was formed in 2003, AIA Inc. owned 50% while AIA Europe owned 30%—each of which

was entirely or nearly entirely-owned by Littaye and Villehuchet. (Zeballos Decl. Exs. K at 6;

CC.) The remaining 20% was owned by Banque Degroof Luxembourg S.A. (“Banque

Degroof”).11 (Zeballos Decl. Ex. K at 6.) Thus, and as the Third Party Plaintiffs’ do not contest,

Littaye and Villehuchet appear to have owned approximately 80% of AML between 2003 and

March 2008. (Def. Br. at 24.) In March 2008, the 80% of AML owned by AIA Inc. and AIA

Europe was purchased by APSA, which, in turn, was 80% owned by Littaye and Villehuchet and

11 Although the Third Party Plaintiffs describe Banque Degroof as “a subsidiary of the venerable Belgian private bank” (Def. Br. at 24), it was no stranger to Access and its BLMIS feeder funds. As the Trustee has detailed in his complaint in Picard v. Banque Degroof SA/NV, Banque Degroof and its affiliates invested directly in multiple BLMIS feeder funds, including Luxalpha and Groupement, and partnered with AML to establish and operate a Luxembourg-based fund called Elite Stability SICAV Stablerock Compartment, which invested heavily in these BLMIS feeder funds. No. 12-01691 (BRL) (Bankr. S.D.N.Y. June 6, 2012). Moreover, Littaye acknowledged Banque Degroof’s importance to Access, stating that they had “accepted to back us up with [the Luxembourg financial regulator] for the past five years”—suggesting that AML partnered with Banque Degroof in order to facilitate the operation of its Luxembourg-based BLMIS feeder funds. (See Suppl. Zeballos Decl. Ex. 33 at 2.)


34

20% by Banque Degroof—meaning that the share ultimately controlled by Littaye and

Villehuchet would have been reduced to 64%, with Banque Degroof’s interest rising to 36% for

some period of time. (Zeballos Decl. Exs. LL; M at 7; see also Def. Br. at 24.) However, this

reduction in Littaye and Villehuchet’s ownership share appears to have been temporary—

according to a July 2011 Corporate Ownership Statement filed by AML in the District Court, by

that point AML was 40% owned by Littaye-controlled entity Dalestrong, 40% by Villehuchet,

and 20% by Banque Degroof. (Suppl. Zeballos Decl. Ex. 34 at 3.)

Although the story is complex, Littaye and Villehuchet together owned between 96% and

100% of Access’s New York office, and appear to have owned 80% of AML for all but a few

months of its operational life. As the Second Circuit has established, 100% common ownership

is not required—rather, only “nearly identical ownership must exist.” Volkswagenwerk

Aktiengesellschaft v. Beech Aircraft Corp., 751 F.2d 117, 120 (2d Cir. 1984). Further, an

examination into “the realities of the actual relationship” is required when assessing common

ownership. See ESI, Inc. v. Coastal Corp., 61 F. Supp. 2d 35, 52 (S.D.N.Y. 1999) (citing

Koehler v. Bank of Bermuda Ltd., 101 F.3d 863, 865 (2d Cir. 1996)). Villehuchet’s and Littaye’s

ownership percentages in Access’s New York office and AML—taken together with their

effective dominance and control of both entities—are sufficient to establish common ownership

under the law of this Circuit. See, e.g, Tsegaye v. Impol Aluminum Corp., No. 01 Civ. 5943,

2003 WL 221743, at *5 (S.D.N.Y. Jan. 30, 2003) (noting that 90% common ownership clearly

satisfies common ownership requirement); ESI, Inc., 61 F. Supp. 2d at 52 (90% common

ownership sufficient for mere department test); Jayne v. Royal Jordanian Airlines Corp., 502 F.

Supp. 848, 852, 859 (S.D.N.Y. 1980) (finding 88% common ownership sufficient and

considering “the aggregate effect of activities and relationships that, taken singly, would not


35

satisfy the ‘mere department’ rule”). However, should the Court conclude that it cannot exercise

personal jurisdiction over AML on the present record, limited jurisdictional discovery would

assist the Trustee to clarify the particulars of Littaye’s and Villehuchet’s ownership stakes in the

relevant entities over the time period at issue. See, e.g., Sayles v. Pacific Eng’g & Constructors,

Ltd., No. 08 CV 676S, 2012 WL 895944, at *4–5 (W.D.N.Y. Mar. 15, 2012) (permitting

jurisdictional discovery to develop facts relating to common ownership).

The second requirement for mere department jurisdiction, financial dependence, is also

satisfied. The Third Party Plaintiffs argue that this factor requires a showing that the subsidiary

would be unable to function without the financial support of the parent. (Def. Br. at 25.) This

showing is easily met, because although AML may have earned its own fees and paid for its

office space with these funds, AML was financially dependent on, and could not have functioned

without the financial support of Access’s New York office. AML would not have had any

purpose, and would not have been able to earn fees, without the activities of Access’s New York

office, and its founders Littaye and Villehuchet, who marketed, operated, and administered

Luxalpha and other funds and directed investment activity to BLMIS in New York and other

U.S.-based investment managers. (Tr. Br. at 29–30); see Beech Aircraft, 751 F.2d at 122–23

(finding mere department jurisdiction where parent’s “financial support is necessary to [foreign

affiliate’s] continued existence”); see also Storm LLC v. Telenor Mobile Commc’ns AS, No. 06

Civ. 13157(GEL), 2006 WL 3735657, at *13 (S.D.N.Y. Dec. 15, 2006) (exercising jurisdiction

over foreign affiliates that were “essentially shell companies” and not financially independent).

Indeed, as BLMIS collapsed, so did Access’s New York office, and consequently so did AML,

which was placed into and remains in liquidation. (See Luxalpha Am. Compl. ¶ 26.)


36

The third requirement, lack of respect for corporate formalities and interference with

personnel is similarly satisfied because Access operated its disparate legal entities as a single

enterprise managed and controlled by key personnel. Although Littaye declares that AML had

its own board of directors that did not hold “combined” meetings (Littaye Decl. ¶ 9), this

argument loses force because Access principals Littaye, Villehuchet, and Delandmeter served on

the board of AML along with the boards of multiple other Access entities, including New York-

based AIA Inc. (Tr. Br. at 34, 42.) Littaye, who states he served on AML’s “management team”

(Littaye Decl. ¶ 10), was Access’s Co-Chairman and Chief Executive Officer. (Zeballos Decl.

Ex. J at 25.) Access’s failure to observe corporate formalities is further demonstrated by how it

grouped its employees by function, rather than by office, and how employees appear to have

worked for more than one entity. (Tr. Br. at 43.) As Access New York employee Dumbauld

tellingly stated, he “theoretically worked for multiple Access entities” and “had contracts . . .

with maybe three different entities,” including “a London-based entity and then maybe a Paris or

French-based entity.” (Suppl. Zeballos Decl. Ex. 35 at 29:6–17.) Access’s disregard for

corporate formalities supports the exercise of mere department jurisdiction over AML.12 See

Obabueki v. Int’l Bus. Mach. Corp., No. 99 Civ. 11262, 2001 WL 921172, at *5 (S.D.N.Y. Aug.

14, 2001) (finding that the “structural overlap” that existed with interlocking directors and

officers and “absence of corporate formalities” supported mere department theory of

jurisdiction); Derthick v. Bassett-Walker Inc., No. 90 Civ. 5427, 1992 WL 249951, at *3

12 The Third Party Plaintiffs argue that the evidence the Trustee has submitted, including Access's meeting minutes, does not support the conclusion that Access failed to observe corporate formalities. (See Def. Br. at 26.) The totality of the evidence demonstrates that Access failed to observe corporate formalities and treated its business as one entity—a finding that, if need be, can be bolstered by jurisdictional discovery.


37

(S.D.N.Y. Sept. 23, 1992) (presence of interlocking officers and directors coupled with evidence

that the companies disregarded corporate formalities weighed in favor of exercising jurisdiction).

Finally, the fourth requirement, control over marketing and operational policies, is met

because of the way that such policies were developed and implemented by Littaye and

Villehuchet and Access’s New York office. As established by the facts set forth in detail in the

Trustee’s Application—facts not contradicted by the Third Party Plaintiffs’ opposition papers or

supporting declarations—Access’s New York office coordinated and controlled major

marketing, management and operational decisions across Access’s worldwide offices and

disparate legal entities, including through regular meetings in New York. (Tr. Br. at 43–44; Def.

Br. at 27–28.) Access’s control over its shell entity AML “substantially exceed[ed] the level of

control inherent in the parent-subsidiary relationship,” entitling the Court to impute the

jurisdictional contacts of Access’s New York office to AML. Dorfman, 2002 WL 14363, at *6;

Van Egeraat, 2009 WL 1209020, at *2–4 (finding mere department relationship where company

with numerous entities and offices “both understands itself and holds itself out to the public as

one firm” and company functions as a “single, integrated entity”).

VI. A SECTION 105 INJUNCTION IS WARRANTED AND CONSISTENT WITH APPLICABLE PRINCIPLES OF INTERNATIONAL COMITY

Having conceded that the automatic stay, Stay Orders, SIPA, and the Barton doctrine

apply to the Luxalpha Third Party Writ, the Third Party Plaintiffs contend that, even if personal

jurisdiction exists over them, the Court should abstain from enforcing the automatic stay, Stay

Orders, SIPA, and the Barton doctrine for reasons of comity. Specifically, the Third Party

Plaintiffs moved to dismiss the Trustee’s Application on the basis of “international comity

concerns” claiming that this Court’s authority to enforce the automatic stay, Stay Orders, SIPA,

and the Barton doctrine under section 105 of the Bankruptcy Code is restricted by the Second


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Circuit’s ruling in China Trade & Development Corp. v. M.V. Choong Yong, 837 F.2d 33, 35–36

(2d Cir. 1987). (Def. Br. at 33–34.) This argument is without merit. The Third Party Plaintiffs

misapprehend the nature of the Trustee’s Application, which is not a request for a traditional anti-suit

injunction of a parallel foreign action. Rather, it is an action to enforce existing orders of this Court

and laws of this jurisdiction. The Third Party Plaintiffs do not dispute that they are violating those

orders and laws. Rather, they argue that principles of international comity prevent this court from

doing anything about that violation, by virtue of the fortuitous circumstance that the violation takes

place abroad. Nothing in the China Trade decision, Second Circuit precedent, or relevant principles

of international law requires this court to sit idly by as a bankruptcy trustee is sued in a foreign

jurisdiction for over a billion dollars in damages. See Somportex Ltd. v. Phila. Chewing Gum Corp.,

453 F.2d 435, 440 (3d Cir. 1972) (“Comity . . . is not a rule of law, but one of practice, convenience,

and expediency. Although more than mere courtesy and accommodation, comity does not achieve

the force of an imperative or obligation.”).

A. The China Trade Test Does Not Apply to the Bankruptcy Court’s Power to Issue the Requested Injunction Under Section 105

The Third Party Plaintiffs assert that the Trustee’s Application should be dismissed for

“failure to state a claim under the China Trade test.” (Def. Br. at 33.) This argument confuses

an action to enforce the automatic stay (such as the instant Application) with an action to enjoin

a parallel foreign action. As the Bankruptcy Court has previously and unambiguously ruled, the

Second Circuit’s holding in China Trade does not apply to enforcement of the automatic stay

and orders of U.S. federal courts. See Maxam, 460 B.R. at 122 (“[G]iven that the foreign

proceeding in China Trade did not violate any law of the United States or interfere with the

exclusive jurisdiction of a U.S. court, this Court finds the comity-based China Trade factors

inapplicable to the instant proceeding. [Defendant] cannot use notions of international comity to


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undermine this Court’s exclusive jurisdiction and interfere with the administration of the

estate.”).

China Trade defines the limits under which parties can seek to enjoin foreign

proceedings on the grounds that they are parallel actions involving identical parties and issues. It

is a rule borne out of policies underlying forum shopping and abuse of process. Comity is a

critical consideration because a petition to enjoin a foreign proceeding, standing alone, seeks to

divest one jurisdiction of the ability to adjudicate the same dispute in favor of another. But

enforcement of the automatic stay requires neither identity of parties nor identity of issues nor a

dispositive impact. It requires only a finding that the action at issue interferes with the orderly

administration of the estate. And this is unquestionably the case here. The Trustee’s Application

is not an attack on a foreign court’s jurisdiction. Rather, it is an attempt to stop an attack on this

Court’s jurisdiction.

None of the cases cited by the Third Party Plaintiffs support the assertion that the China

Trade test applies to the instant Application. The Third Party Plaintiffs cite Jamaica Shipping

Co. v. Orient Shipping Rotterdam, B.V. (In re Millenium Seacarriers, Inc.), 458 F.3d 92, 97–98

(2d Cir. 2006) for the proposition that the “Second Circuit reversed a bankruptcy court’s

injunction for failing to apply the China Trade test.” (Def. Br. at 35.) But the injunction at issue

in Jamaica Shipping merely enjoined foreign litigation between a purchaser of property of the

debtor’s estate and the debtor’s former contractual counterparty. The enjoined litigation in that

case, as opposed to the instant proceeding, in no way implicated control over property of the

debtor’s estate, the automatic stay, or violations of U.S. law. There was no impact on the orderly

administration of the bankruptcy estate. Similarly, neither Karaha Bodas Co. v. Perusahaan

Pertambangan Minyak Dan Gas Bumi Negara, 500 F.3d 111, 119–20 (2d Cir. 2007) nor


40

Hyundai Mipo Dockyard Co. v. AEP/Borden Industries (In re Rationis Enterprises, Inc. of

Panama), 261 F.3d 264 (2d Cir. 2001), address the applicability of the China Trade test within

the bankruptcy context or within the context of an injunction seeking to redress a violation of

U.S. law. (See Def. Br. at 35.) Karaha Bodas held that the China Trade test was the relevant

test for an injunction relating to a foreign proceeding that sought to collaterally attack a federal

judgment confirming a foreign arbitral award. Karaha Bodas, 500 F.3d at 120. Hyundai Mipo

applied the China Trade test to vacate an injunction relating to a declaratory judgment action

brought by a third-party defendant in Korea who sought a declaration of non-liability with

respect to an admiralty case pending in the United States. Hyundai Mipo, 261 F.3d at 270–71.

By contrast, injunctions issued under section 105 of the Bankruptcy Code to enforce the

automatic stay, remedy violations of U.S. law, or otherwise protect the bankruptcy court’s

jurisdiction over property of the estate have not implicated the China Trade test. See, e.g.,

Lyondell Chem. Co. v. CenterPoint Energy Gas Servs., Inc. (In re Lyondell Chem. Co.), 402 B.R.

571 (Bankr. S.D.N.Y. 2009) (enjoining, without applying the China Trade test, creditors from

pursuing remedies against Debtor’s nondebtor parent guarantor in Luxembourg and elsewhere

under court’s section 105 authority).

The Third Party Plaintiffs’ reliance on the Third Circuit’s ruling in Stonington Partners,

Inc. v. Lernout & Hauspie Speech Products N.V., 310 F.3d 118 (3d Cir. 2002), is also misplaced.

Stonington held that, in the context of a cross-border insolvency adjudicated prior to the passage

of Chapter 15 of the Bankruptcy Code, a contingent creditor could not be estopped from

prosecuting its claim in parallel bankruptcy proceedings taking place in Belgium. Stonington,

310 F.3d at 129. However, Stonington is inapplicable where, as here, the enjoining party has not

initiated a parallel bankruptcy proceeding in a foreign country. See Maxam II, 474 B.R. at 86.


41

Significantly, the debtor in Stonington who sought to enjoin its contingent creditor in Belgium

had itself voluntarily sought the protection of the Belgian bankruptcy court, whereas the Trustee

has not filed a bankruptcy petition in Luxembourg on behalf of BLMIS.13 See Stonington, 310

F.3d at 122.

Moreover, in contrast to the Trustee’s Application in the instant proceeding, the

injunction at issue in Stonington was not an order enforcing the automatic stay or otherwise

protecting the in rem jurisdiction of the bankruptcy court. Rather, Stonington and each of the

cases cited therein applying the “anti-suit injunction” test urged by the Third Party Plaintiffs,

involved either the adjudication of in personam claims outside of bankruptcy that did not impact

the orderly administration of a U.S. bankruptcy proceeding or the existence of parallel

bankruptcy proceedings taking place in two different countries.14

The Third Party Plaintiffs claim that “[e]njoining the third party writ could frustrate the

nation of Luxembourg’s ability to wind up the affairs of Luxalpha and AML.” (Def. Br. at 36.)

This claim is contrary to Luxembourg law, which permits a determination of the Third Party

13 The Third Party Plaintiffs fault the Trustee for not appearing in Luxembourg. (Def. Br. at 37.) Clearly, there is no reason for him to subject the BLMIS estate to Luxembourg law when the estate is being administered exclusively in New York. The Third Party Plaintiffs cite no authority for the proposition that the China Trade test requires a party to appear in a foreign proceeding before seeking an injunction. Rather, they rely on an out-of-context quotation from another circuit. (Id. (quoting Goss Int’l Corp. v. Man Roland Druckmaschinen Aktiengesellschaft, 491 F.3d 355, 360 (8th Cir. 2007) (finding that “liberal” approach to anti-suit injunctions conveys the message that a court has little confidence in a foreign court’s ability to adjudicate a given dispute)).)

14 See Stonington, 310 F.3d 118 (parallel bankruptcy proceedings); Compagnie des Bauxites de Guinea v. Ins. Co. of N. Am., 651 F.2d 877, 887 (3d Cir. 1981) (in personam action seeking recovery from insurers on insurance claim); Gen. Elec. Co. v. Deutz AG, 270 F.3d 144, 161 (3d Cir. 2001) (in personam breach of contract action); Maxwell Commc’n Corp. v. Societe Generale (In re Maxwell Commc’n Corp.), 93 F.3d 1036, 1048 (2d Cir. 1996) (parallel bankruptcy proceedings); Remington Rand Corp.-Delaware v. Bus. Sys., Inc., 830 F.2d 1260, 1271 (3d Cir. 1987) (parallel bankruptcy proceedings); China Trade, 837 F.2d at 36 (in personam breach of contract action); Gau Shan Co. v. Bankers Trust Co., 956 F.2d 1349, 1355 (6th Cir. 1992) (in personam fraud and negligence action); Laker Airways, Ltd. v. Sabena, Belgian World Airlines, 731 F.2d 909, 925 (D.C. Cir. 1984) (in personam antitrust claims); Goss Int’l, 491 F.3d 355 (in personam action brought under Antidumping Act of 1916); Ibeto Petrochemical Indus. Ltd. v. M/T Beffen, 475 F.3d 56 (2d Cir. 2007) (in personam claim to recover damages related to seawater contamination).


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Plaintiffs’ liability to Luxalpha without impleading the Trustee. (See Schiltz Decl. ¶ 5.)

Furthermore, given the Third Party Plaintiffs’ assertion that they are not seeking to recover assets

from the BLMIS estate (Def. Br. at 4), it is unclear how the Luxalpha Third Party Writ would

affect the winding up of either Luxalpha or AML.

B. Even if the China Trade Test Were to Apply, the Requested Injunction Would Be Warranted

In arguing that the China Trade test precludes this Court from enforcing the automatic

stay, Stay Orders, SIPA, and the Barton doctrine through a section 105 injunction, the Third

Party Plaintiffs erroneously conflate the Luxalpha Third Party Writ with the Luxalpha Liquidator

Action in Luxembourg. (Def. Br. at 36–37.) The Trustee does not seek to enjoin the Third Party

Plaintiffs from participating in the Luxalpha Liquidator Action, which poses no threat to estate

property, the administration of the estate, or the Bankruptcy Court’s jurisdiction.

Rather, the requested injunction would affect only the Luxalpha Third Party Writ—a

separate action that seeks to indemnify the Third Party Plaintiffs for their potential liability in the

Luxalpha Liquidator Action. Moreover, the Trustee requests that this Court enjoin the Third

Party Plaintiffs from prosecuting the Luxalpha Third Party Writ only as against the Trustee, not

the other parties sued in the Luxalpha Third Party Writ. (Tr. Br. at 48.) Accordingly, when

applying the China Trade factors, this Court should only consider the connections between the

Trustee’s Luxalpha Action15 and the Luxalpha Third Party Writ as against the Trustee.

15 Although it has absolutely no relevance to either the Third Party Plaintiffs’ opposition to the Trustee’s Application or their motion to dismiss, the Third Party Plaintiffs assert that the Trustee’s Luxalpha Action is a violation of a Luxembourg automatic stay. (See Def. Br. at 4.) Not only is this allegation unsupported, it is incorrect. As set forth in note 5 to article 452 of the Luxembourg Commercial Code, only the collection of a judgment against the bankruptcy estate is stayed. (See Suppl. Zeballos Decl. Ex. 36.)


43

1. Enjoining the Luxalpha Third Party Writ Is Consistent With the China Trade Threshold Factors

The first “threshold factor” articulated in China Trade requires that “‘the parties to the

two actions are . . . sufficiently similar.’” Storm LLC, 2006 WL 3735657, at *6 (quoting

Paramedics Electromedicina Comercial, Ltda. V. GE Med. Sys. Info. Techs., Inc., 369 F.3d 645,

653 (2d Cir. 2004)) (emphasis omitted); see also In re Vivendi Universal, S.A. Sec. Litig., No. 02

Civ. 5571, 2009 WL 3859066, at *5 (S.D.N.Y. Nov. 19, 2009). The Trustee and the Third Party

Plaintiffs—the only parties that would be affected by the requested injunction—are parties to

both the Luxalpha Action and the Luxalpha Third Party Writ. The Third Party Plaintiffs thus do

not contest that the first threshold condition is satisfied.

The second threshold condition is met where “‘resolution of the case before the enjoining

court [will] be dispositive of the action to be enjoined.’” Lam Yeen Leng v. Pinnacle

Performance Ltd., 474 F. App’x 810, 813 (2d Cir. 2012) (quoting China Trade, 837 F.2d at 35).

With respect to this factor, “a number of cases have focused on whether the substance of the

claims and arguments raised in the two actions is the same.” Vivendi, 2009 WL 3859066, at *6

(collecting cases). The Luxalpha Third Party Writ, as to the Trustee, requires a determination of

BLMIS’s liability, if any, to the Third Party Plaintiffs and/or Luxalpha. The Trustee’s Luxalpha

Action necessarily involves such a determination.16 (See Luxalpha Am. Complaint ¶¶ 344–48.)

16 The Third Party Plaintiffs mischaracterize the Trustee’s opposition to Luxalpha’s motion for forum non conveniens in the Trustee’s Luxalpha Action. (See Def. Br. 36–37.) There, the Trustee noted that the Luxalpha Liquidator Action would not dispose of all claims in the Trustee’s Luxalpha Action, which seeks broad relief from numerous defendants, not all whom are party to the Luxalpha Liquidator Action. (See id. at 37; Luxalpha Am. Compl. ¶¶ 17–47; Zeballos Decl. Ex. A at 2–4.) The Trustee now makes the separate and entirely different assertion that the Trustee’s Luxalpha Action would dispose of the Luxalpha Third Party Writ’s narrow claims against the Trustee.


44

2. The Third Party Plaintiffs Have Not Established That the Additional Factors Weigh Against Enforcement of the Automatic Stay or an Injunction

The Third Party Plaintiffs also contend that the Luxalpha Third Party Writ will not affect

the BLMIS estate, does not threaten U.S. public policy, and is not vexatious because it was first-

filed. (Def. Br. at 37.) The Third Party Plaintiffs are incorrect.

First, as the bankruptcy court has already held in a similar case, foreign actions against

the Trustee such as the Luxalpha Third Party Writ threaten the BLMIS estate as well as the

public policy underlying SIPA. See Maxam, 460 B.R. at 121 (“If every foreign defendant could

seek declaratory relief in its own country it would significantly erode the intended protections of

SIPA by delaying the rightful return of customer property, waste the Trustee’s time and assets,

and frustrate this Court’s ability to fairly and uniformly distribute customer property to

defrauded BLMIS customers as intended by SIPA.”). If the Luxalpha Third Party Writ is not

enjoined, the Trustee will be forced to defend himself and property of the BLMIS estate in the

first of what could prove to be several multi-million or billion dollar lawsuits brought worldwide

by defendants in adversary proceedings currently before this Court.

Second, the Luxalpha Third Party Writ is vexatious because it requires the Trustee to

relitigate claims already before the Bankruptcy Court, subverting the claims process set forth in

SIPA (by potentially creating a general unsecured claim against the BLMIS estate where none

had existed before). The District Court recently held that a similar foreign action against the

Trustee “would indeed vexatiously require the Trustee to relitigate claims pending in [an]

adversary proceeding” before the Bankruptcy Court. Maxam II, 474 B.R. at 87. The Luxalpha

Third Party Writ thus will result in additional inconvenience, expense and inconsistency.

Third, the threat of a multibillion dollar judgment posed by the Luxalpha Third Party

Writ will impede the administration of the BLMIS estate by vesting determination of bankruptcy


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claims in a foreign jurisdiction. See Maxam II, 474 B.R. at 87. The Luxalpha Third Party Writ

thus threatens the Bankruptcy Court’s exclusive in rem jurisdiction over property of the estate.

Accordingly, to the extent the China Trade test is applicable, it is satisfied here.

CONCLUSION

For the foregoing reasons, and those set forth in the Trustee’s opening papers, the Court

should grant the Trustee’s Application and deny the Motion to Dismiss.

Dated: New York, New York September 24, 2012 /s/ Deborah H. Renner Baker & Hostetler LLP 45 Rockefeller Plaza New York, New York 10111

Telephone: (212) 589-4200 Facsimile: (212) 589-4201 David J. Sheehan Email: [email protected] Deborah H. Renner Email: [email protected] Gonzalo S. Zeballos Email: [email protected] Keith R. Murphy Email: [email protected] Samir K. Ranade Email: [email protected] James W. Day Email: [email protected] Matthew J. Moody Email: [email protected] Sammantha E. Clegg Email: [email protected] Constantine P. Economides Email: [email protected] Attorneys for Irving H. Picard, Trustee for the Substantively Consolidated SIPA Liquidation of Bernard L. Madoff Investment Securities LLC and Estate of Bernard L. Madoff


12-01563-brl doc 22 filed 09/24/12 entered 09/24/12 20:09 ...€¦ · motion to dismiss for lack of...

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